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European Review of Agricultural Economics Advance Access originally published online on July 7, 2007
European Review of Agricultural Economics 2007 34(2):141-159; doi:10.1093/erae/jbm020
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© Oxford University Press and Foundation for the European Review of Agricultural Economics 2007; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org

Stimulating organic farming via publicly provided services and an auction-based subsidy

Eli Feinerman1 and Cornelis Gardebroek2,

1 The Hebrew University of Jerusalem, Rehovoth, Israel
2 Wageningen University, The Netherlands

Corresponding author: Cornelis Gardebroek, Department of Agricultural Economics and Rural Policy, Wageningen University, P.O. Box 8130, 6700 EW, Wageningen, The Netherlands. E-mail: koos.gardebroek{at}wur.nl

Received December 2005; Revision received March 2007. Governments generally use a mix of temporary hectare payments and provision of public services to stimulate the organic crop sector. In this paper, a conceptual model is developed for determining a socially optimal hectare payment for any given level of public services. Farm heterogeneity, due to the variability of soil quality and management skills, is explicitly taken into account. Using an nth price auction mechanism, farmers indicate what their reservation subsidy is for a given level of public input provision. The results of this auction are used to determine the government's optimal policy choices.

Keywords: auctions, organic farming, policy mix

JEL classification: Q28, Q12


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