Farmer response to policies promoting organic farming technologies in Finland

This paper analyses factors determining the choice between standard and org anic farming technology in Finland by numerically iterating a Bellman equat ion backwards in time. The unknown parameters of a switching-type Probit mo del are estimated by maximum likelihood estimation. The maximised values of the uncertain revenue streams are simulated. The results suggest that decr easing output prices and increasing direct subsidies trigger the switch to organic farming. The switch is also more likely on farms having large land areas and low yields. Intensive livestock production and labour-intensive p roduction decrease the probability of switching to organic farming.