Organic Hotspots in the US Found to Benefit Local Economies

THIRD WORLD NETWORK INFORMATION SERVICE ON SUSTAINABLE AGRICULTURE

Dear Friends and Colleagues

Organic Hotspots in the US Found to Benefit Local Economies

Agronomists and other agricultural scientists have evaluated organic cropping systems in terms of yield, soil health and environmental impacts. However, economists or other social scientists have not assessed the economic impact of organic agriculture on local economies in systematic, empirical studies. A recent study has assessed the impact of increased levels of organic agricultural activity, all else being equal, on county-level economic indicators in the US, using a treatment effects empirical model.

The results showed that being in one of the three types of organic hotspots (general organic hotspots, hotspots of organic production or hotspots of organic handling) led to a lower county-level poverty rate and a higher median household income. A similar result was not found when investigating the impact of general agriculture hotspots.

These results provide strong motivation for considering hotspots of organic handling operations, which refers to middlemen such as processors, wholesalers and brokers, and hotspots of organic production to be local economic development tools. This may be of interest to policymakers whose objective is to promote rural development. The results may incentivize policymakers to specifically focus on organic development, rather than the more general development of agriculture, as a means to promote economic growth in rural areas. They may further point themin the direction of not only encouraging the presence of organic operations, but of fostering the development of clusters or hotspots of these operations.

With best wishes,

ECONOMIC IMPACT OF ORGANIC AGRICULTURE HOTSPOTS IN THE UNITED STATES

Marasteanu IJ and Jaenicke EC
Renewable Agriculture and Food Systems
https://doi.org/ 10.1017/S1742170518000066
3 Jan 2018, updated 16 March 2018
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2765969

Abstract

In this paper, we assess whether or not organic agriculture has a positive impact on local economies. We first identify organic agriculture hotspots (clusters of counties with positively correlated high numbers of organic operations) using spatial statistics. Then, we estimate a treatment effects model that classifies a county’s membership in an organic hotspot as an endogenous treatment variable. By modeling what a hotspot county’s economic indicators would have been had the county not been part of a hotspot, this model captures the effect of being in a hotspot on a county’s economic indicators. We perform the same analysis for general agricultural farm hotspots to confirm that the benefits associated with organic production hotspots are, in fact, due to the organic component. Our results show that organic hotspot membership leads to a lower county-level poverty rate and a higher median household income. A similar result is not found when investigating the impact of general agriculture hotspots. On the other hand, our result is robust to alternative hotspot definitions based on type of organic operations to alternative methods of estimating average treatment effects on the treated. These results provide strong motivation for considering hotspots of organic handling operations, which refers to middlemen such as processors, wholesalers and brokers, and hotspots of organic production to be local economic development tools, and may be of interest to policymakers whose objective is to promote rural development. Our results may incentivize policymakers to specifically focus on organic development, rather than the more general development of agriculture, as a means to promote economic growth in rural areas, and may further point themin the direction of not only encouraging the presence of organic operations, but of fostering the development of clusters or hotspots of these operations.

Conclusions and further steps

The purpose of this paper is to assess whether or not organic agriculture has a positive impact on local economies. To answer this question, we establish a rigorous concept of what constitutes increased levels of organic agriculture at a local level by using spatial statistics to identify hotspots of organic operations. We then determine an appropriate analysis that accounts for non-random formation of hotspots and potentially endogenous formation of hotspots by using an endogenous regressor treatment effects model to quantify the impact of organic hotspots on two economic indicators: a county’s poverty rate and median household income. We also perform the same analysis for general agricultural farm hotspots to confirm that the benefits associated with organic production hotspots were, in fact, due to the organic component.

Our results consistently show that being in one of the three types of organic hotspots (general organic hotspots, hotspots of organic production or hotspots of organic handling) is beneficial to the county-level economic indicators. On the other hand, the impact of agricultural farm hotspots on county-level economic indicators appears not to be significant. These results provide strong motivation for considering hotspots of organic handling operations and hotspots of organic production to be local economic development tools. Our results may be of interest to policymakers whose objective is to promote rural development. Our conclusion that organic hotspots have a positive and significant impact on local economic indicators, while hotspots of general agriculture show no such clear pattern, may incentivize these policymakers to specifically focus on organic development, rather than the more general development of agriculture, as a means to promote economic growth in rural areas. In addition, our specific focus on hotspots may point policy makers in the direction of not only encouraging the presence of organic operations, but of fostering the development of clusters or hotspots of these operations.

A few extensions may be addressed in the future. It may be interesting to study the role of the organic certifier on hotspot formation, as the certifier may play a pivotal role in policies that promote organic agriculture. Future research might also examine the impact of coldspots on economic indicators, as well as investigate the threshold level (i.e., somewhere in between the mere presence of organic agriculture in a county to a full-fledged hotspot) where positive economic impacts begin. The level of organic sales may also be interesting to investigate further. Finally, while our results suggest that organic hotspots benefit regional economies, it is difficult to predict whether or not these effects will continue as the organic industry grows, or if there is a diminishing impact as hotspots grow. It would be interesting to study if and how these effects change as organic production expands in the USA.