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Certification and Agro‐Ecological Practice Use Linkages and Investment Impact

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Certification and Agro‐Ecological Practice Use Linkages and Investment Impact

  1. 1. Certification and Agro‐Ecological Practice  Use Linkages and Investment Impact Linda Kleemann 02/08/2012
  2. 2. Overview of presentation1. Motivation2. Literature Review3. Sector and Data4. Theory5. Empirical Strategy and Results6. Discussion and Policy Implications
  3. 3. Motivation Relevance  Environmental effects of agriculture  Political will to increase adoption of sustainable farming techniques  Questionable sustainability of organic agriculture in Africa? Our contribution  Link between certification and adoption of agro‐ecological practices  …and between adoption and ROI (not yield)
  4. 4. Research Question(s) Does organic certification increase agro‐ecological practice use? How does the intensity of agro‐ecological practice use influence the ROI?
  5. 5. Literature Review Impact of certification on adoption  “usual impression”: Organic farming in Africa means to stop using chemicals,  but not to adopt alternative soil fertility management practices. Small‐scale  farmers produce ”organically by default”.  Bolwig et al. (2009) and Blackman and Naranjo (2010): some adoption  Impact of organic certification on ROI  Modest positive effect on farmer welfare (poverty,  hh income,…)  Possibly negative effect on yield  Impacts of agro‐ecological practice use  Yield increases? (1999; Pretty et al., 2006; Branca et al., 2011; Onduru et al.,  2002)  Lower production costs? (Dasgupta et al., 2007)  Revenues increases? (Bolwig et al., 2009)  Environmental effects
  6. 6. Export Pineapple Production in Ghana 6
  7. 7. Actors in the Pineapple Sector SmallholdersLocal buyers MoFA Development  Agrencies, NGOs Export  ProcessorscompaniesLarge farms
  8. 8. Data  Household survey of 386 farmers  January to March 2010  75 villages from 6 districts in Central, Eastern and Greater Accra region  185 organic (from 9 farmer associations),  201 conventional (from 14 farmer associations) Stratified random sampling  Districts with high production  Percentage of certified groups in districts
  9. 9. Descriptive StatisticsDefinition Variable Organic Convent.  T‐Stat. Farmers  Farmers (N=185) (N=201)Gender of household head (0=female, 1=male) GENDER 0.891 0.982 3.51***Age of HHH AGE 46.313 42.970 ‐2.82***Household size (persons living in household) HHSIZE 5.230 5.917 2.35**Maximal educational level in household EDUC 3.566 3.941 3.40***Farm size (acre) FSIZE 10.35 18.720 5.02***Pineapple land (acre) PINLAND 4.014 3.066 ‐2.07**Share of land owned OWNLAND 0.549 0.204 ‐7.628***Access to credit (0=no, 1=yes) CREDIT 0.317 0.232 ‐1.78*Bank account with more than 200 GHS BANK 0.339 0.512 3.21***Number of durable goods owned WEALTH 4.765 8.481 10.875***Relation to the local government GOVERN 2.257 1.774  ‐4.27***Self‐stated openness to innovation and risk RISK 0.152 ‐0.166 ‐3.01***People that are met regularly MEET 1.175 1.196 0.45Years of experience in pineapple farming EXPER 11.557 11.595 0.05Distance to the closest local market (hours) DIST 0.698 0.804 1.59Assistance or training for farming received  ASSIST 0.732 0.708 ‐0.5
  10. 10. Intensity of Agro‐ecological Practice Use
  11. 11. Theoretical Framework  Basic utility maximization framework  Choice of intensity to maximize the expected net utility  Utility function depends on net returns (Π) which are dependent on the level of output Q, output prices Po, inputs I and their prices Ii, and farm and household characteristics Z: E Π E , Π =Π , , ,  with Ae = agro‐ecological intensity Π =  and probability of adoption for each level: ∗ ∗ Π 1 Π Π
  12. 12. Empirical Strategy 1) link between certification and adoption of agro‐ecological practices  What is the impact of organic certification on the use of agro‐ ecological practices? 2) link between adoption of agro‐ecological practices and ROI  What is the impact of the intensity of agro‐ecological practice use on  the ROI?
  13. 13. 1) Organic certification and adoption of agro‐ecological practices
  14. 14. 2) Impact of use of agro‐ecological practices on ROIGeneralized propensity score matching (Hirano and Imbens, 2004) ; We observe (exogenous controls), Ti (continous treatment variable)  and  (outcome variable) associated with each treatment level. We want to measure the average dose response function (DRF)  which relates the unbiased potential outcome to each treatment level  : ∀  Assumption: weak unconfoundedness:  ⎸ ∀  Generalized propensity score (GPS) :  , average dose response function (DRF):  , , Where  , ,
  15. 15. 2) Impact of use of agro‐ecological practices on ROI (ctd.) Our model:   GPS estimation using normal distribution of the logarithmic treatment • Kolomogorov‐Smirnov test for normality for logarithm of the  treatment variable (Hirano and Imbens, 2004)   Common support condition: 278 farmers on support  quadratic approximation for average potential outcome at each  treatment level
  16. 16. Results GPSM
  17. 17. Robustness Checks GPSM: no weights No weights Different weighting schemeRestricted to values < 13 Weeding excluded
  18. 18. ConclusionBackground: Why is the extent of adoption low?A common concern is that organic   Availability of organicfarmers in developing countries  materialremain in an unsustainable low‐  Transport costsyielding state of ”organic‐by‐default” production Agriculture is responsible for environmental damage Potential SolutionResults:  Use certification or involved market linkages  Certification has a large  influence  Support by buyers  Economic barriers to  required agro‐ecological intensification dependent on  practices intensity

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