Conversion subsidies for organic production: results from Sweden and lessons for the United States

Organic conversion subsidies used in Europe are less likely to be political ly acceptable in the United States, where organic agriculture development i s market-driven. Persistent barriers to conversion in the United States inc lude limited availability of and access to production and market informatio n, training in management systems and cost of conversion-related investment s. By determining whether these factors affect the requirement of a subsidy to convert, we can suggest whether U.S. policy makers need to provide subs idies to encourage conversion and identify policy variables consistent with market-based approaches that could stimulate conversion. A utility differe nce model is used with Swedish data to analyze factors that determine wheth er a subsidy is required to motivate organic conversion. The results show t hat farmers requiring subsidies manage larger less-diversified farms and ar e more concerned with organic inspection, quality, and adequacy of technica l advice. Access to more market outlets and information sources substitutes for payment level in the farmer's utility function, indicating that servic es rather than subsidies may be used to encourage organic agriculture. To t he extent that conditions are similar in the U.S. organic sector, market-ba sed programs such as cost-sharing for conversion and market access improvem ent should stimulate growth of this industry. (C) 2000 Elsevier Science B.V . All rights reserved.