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The Impact of Dynamic Profit Maximization on Biodiversity: A Network DEA Application to UK Cereal Farms

Frederic Ang, Simon Mortimer, Francisco Areal () and Richard Tiffin

No 205857, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association

Abstract: Using a nonparametric framework, we analyse the impact of dynamic profit maximization on biodiversity for a sample of UK cereal farms for the year 2007. Recognizing the drawbacks of directly implementing biodiversity as an output or input in a distance function framework, we only consider inputs and outputs that are clear choice variables from the firm’s perspective. We use a dynamic, intertemporal profit function to take into account adjustment costs. We assess how dynamic profit maximization may shift land use allocation and, as a consequence, the Shannon index for crop diversification. Doing so allows us to calculate the shadow prices of crop diversification in a novel way that is consistent with the dynamic theory of the firm.

Keywords: Environmental Economics and Policy; Land Economics/Use; Production Economics (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-bec, nep-eff and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea15:205857

DOI: 10.22004/ag.econ.205857

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