Does Neighborhood Matter? A Micro-level Spatial Analysis of the Entry and Exit of Organic Farming Program in Southern Sweden

We investigate farmers’ decision to engage in organic production. Our objective is to identify the key factors that promote or hinder the update of organic farming. In particular, we focus on neighborhood factors and the spatial allocation of organic land parcels. A rich spatial panel data of all agricultural parcels is compiled and the information on land use, soil quality, biodiversity, local landscapes, and neighborhood characteristics are extracted using ArcGIS techniques. We carry out both cross-sectional analyses and panel data models. In the cross –sectional analysis, we focus on the duration that a parcel stays in organic production: to temporarily enroll into organic farming program for subsidy or to convert to organic production permanently. In the panel data model, we analyze whether a parcel stays in organic production in a period by assuming there is or there is no temporary correlation. We find that neighborhood characteristics do have significant effects on farmers’ decision. Such effects manifest in the following four areas: 1) a farm with a higher share of organic land in its adjacent neighborhood is more likely to be organic temporarily or permanently; 2) a neighborhood with a higher share of ley and grass land, hence, a higher potential for biological control, can promote conversion to organic production; 3) a parcel with a larger shared border per unit area with other parcels are less likely to be engaged in organic production; and 4), a neighborhood with abundant floral species and more floral spices that are suitable to traditional agricultural production has more parcels being converted to organic production. We also find that highly productive land is less likely to be enrolled into organic farming programs, which confirms the finding from literature that profits is an important factor that affects farmers’ decision. Farmers tend to convert parcels that are far away from their houses to organic while keep the parcels close by in conventional production. Small farms and farms that are more diversified are more likely to be shifted to organic production. Our findings are hence in favor of the policy suggestions on agglomeration payments in biodiversity conservation. Keyword: Organic farming, Neighborhood effect, Neighboring effect, Edge effect, Biodiversity JEL codes: Q01, Q18, Q24, Q38, Q57, Q58 Acknowledgement: Financial support from BECC and from the Formas program COMMONS is gratefully acknowledged. We thank the Swedish Board of Agriculture for providing the data that support this analysis. The contents are solely the responsibility of the authors and do not necessarily reflect the official views of the BECC, COMMONS, or the Swedish Board of Agriculture.