1. Organic Certification, Agro-EcologicalPractices and Return on Investment: Farm Level Evidence from Ghana Linda Kleemann Kiel Institute for the World Economy

2. MotivationIntroduction Data Framework Empirical Strategy I Empirical Strategy II ConclusionBackground: organic certification does not require use of agro-ecological practicesRelevance: fear that organic agriculture in Africa not sustainable and political will to increase adoption of sustainable farming techniquesContribution: impact of certification on adoption of agro- ecological practices and of adoption on ROI (not yield)

3. What are agro-ecological practices?Introduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion Variable Organic Conventional t-Statistics Organic fertilizer 2.164 0.030 8.288 *** Organic pesticides 0.083 0.082 -0.032 Mulch 1.590 1.328 5.294 *** Manure 1.998 0.912 3.543 *** Weeding 2.410 2.327 0.566 Cover crops 0.175 0.161 0.353 Crop rotation 0.980 0.132 6.343 *** Trash lines 2.932 1.043 9.451 *** Infiltration ditches 1.066 0.721 1.979 ** Leguminous 0.066 0.018 2.217 ** residues Significance levels for the t-statistics of the mean difference test: *: 10% **: 5% ***: 1%

4. SurveyIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion Household survey 386 small-scale farmers Cross-section data from 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 farmer groups in districts

5. Export pineapple production area in Ghana 5

6. Selected descriptive statisticsIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion Definition Organic Conv. Sign. Gender of household head 0.891 0. 982 *** Age of HHH 46.31 42.97 *** Household size 5.230 5.917 ** Fraction of adults (older than 15) in household 0.684 0.665 Native in community 0.738 0.738 Maximal educational level in household (years) 9.470 10.19 *** Share of land owned 0.549 0.204 *** Pineapple land (acre) 4.014 3.066 ** Access to credit during last 5 years 0.317 0.232 * Years of experience in pineapple farming 11.56 11.60 Distance to the closest local market (hours) 0.698 0.804

7. Research questionsIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion How does organic certification influence agro-ecological practice use? What influence does the intensity of agro-ecological practice use have on the ROI?

8. Conceptual frameworkIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

9. Empirical strategy: impact of organic farming on agro-ecological practicesIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

10. Results of impact of organic certification on agro-ecological practice use Introduction Data Framework Empirical Strategy I Empirical Strategy II ConclusionMethod Predicted Predicted ATT t-Statistics organic conventionalESR Organic certified farmers 5.921 2.518 3.403 13.31 *** Conventional farmers 8.135 3.788Alternative SpecificationsESR using different weights Organic certified farmers 6.102 3.046 3.056 11.47 *** Conventional farmers 7.979 3.594ESR using no weights Organic certified farmers 5.986 2.136 3.851 12.26 *** Conventional farmers 8.115 3.266ESR (weeding excluded) Organic certified farmers 5.728 2.667 3.061 10.89 *** Conventional farmers 7.934 3.363PSM Kernel (bandwidth=0.4) 6.751 2.680 4.071 7.98 *** Radius (caliper=0.05) 6.751 2.523 4.228 7.34 *** Nearest-neighbor 6.751 2.351 4.400 6.98 ***

11. Research questionsIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion How does organic certification influence agro-ecological practice use? What influence does the intensity of agro-ecological practice use have on the ROI?

12. Empirical strategy: impact of use of agro-ecological practices on ROIIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

13. Generalized propensity scoreIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

14. Impact of intensity of agro-ecological practice use on ROIIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

15. ConclusionIntroduction Data Framework Empirical Strategy I Empirical Strategy II ConclusionBasis: Policy Implications:Concern that small organic farmers Strengthen link betweenin developing countries may remain certification and agro-ecologicalin an unsustainable low-yielding practice usestate of organic-by-default Economic barriers to intensificationproductionResults: Help small-scale farmers toCertification serves as a catalyst for surmount low impact dipthe use of agro-ecological practices Availability of organicPositive and nonlinear relationship material and transportbetween ROI and practice use costs

16. Appendix

17. Descriptive statisticsDefinition Variable Organic Convent. Sign. Introduction Data Framework Empirical Strategy I Empirical Strategy II (N=185) Conclusion (N=201)Gender of household head (HHH) GENDER 0.891 0. 982 *** 1 if HHH is male, 0 otherwiseAge of HHH AGE 46.313 42.970 ***Household size (persons living in household) HHSIZE 5.230 5.917 **Fraction of adults (older than 15) in household ADULT 0.684 0.665Being native in community (1 if yes, 0 otherwise) NATIVE 0.738 0.738Maximal educational level in household (years) EDUC 9.470 10.195 ***Farm size (acre) FSIZE 10.35 18.720 ***Share of land owned OWNLAND 0.549 0.204 ***Pineapple land (acre) PINLAND 4.014 3.066 **Access to credit during the last 5 years CREDIT 0.317 0.232 * 1 if yes, 0 otherwiseBank account with more than 200 GHS BANK 0.339 0.512 *** 1 if yes, 0 otherwiseNumber of durable goods owned WEALTH 4.765 8.481 ***Relation to the local government GOVERN 2.257 1.774 *** 1=none, 2=HHH knows someone in the local government, 3=HHH has friends in the local government, 4=strong relation/politically activeSelf-stated openness to innovation and risk (factor analysis: RISK 0.152 -0.166 *** the stronger the agreement, the larger)Years of experience in pineapple farming EXPER 11.557 11.595

18. Definition Variable Organic Convent. Sign (N=185) (N=201) .How pineapple farming was learned from family members and friends LEARN 1 0.863 0.501 *** (1 if yes, 0 otherwise) as a laborer on a farm or from LEARN 2 0.071 0.286 *** (1 if yes, 0 otherwise)Frequency of being in Accra ACCRA 3.661 1.976 *** 1=never, 2=once, 3=at least once a year, , 6=at least once a weekImportance of preserving the environment ENV 1.775 1.281 *** 1= very important, ..., 4= not importantNumber of years being certified CERTIFYEARS 3.165 2.032 ***Distance to the closest local market (hours) DIST 0.698 0.804Soil characteristics SOIL 2.781 2.304 ** 1=red or black sandy, 2=white sandy, 3=white rocky, 4=rocky red or black, 5=sandy or rocky clay, 6=clay, 7=other Variety Smooth Cayenne (1 if yes, 0 otherwise) SC 0.098 0.351 *** Variety Sugar Loaf (1 if yes, 0 otherwise) SL 0.634 0.036 ***Share of labor cost for hired workers HIRED 0.484 0.607 ***Assistance or training for farming received during last 5 years (1 if yes, 0 ASSIST 0.732 0.708 otherwise)Number of farm inspection during the last 5 years INSPECT 1.913 2.619Written contract with exporter (1 if yes, 0 otherwise) CONTR 0.410 0.417Organizer of the certification process ORGA 0.508 0.143 *** (1 if farmer organization, 0 otherwise)Significance levels: *: 10% **: 5% ***: 1%Conversion factor of 1 GHS = 0.46 Euros (calculated on the basis of the exchange rate on January 12, 2010).

19. Descriptive statistics of economic variables Introduction Data Framework Empirical Strategy I Empirical Strategy II ConclusionVariable Organic Conventional Sign. Farmers FarmersAgricultural equipment 0.002 0.009 ***Agricultural inputs 0.011 0.077 ***Renewal of certification 0.000 0.006 ***Land used for pineapple 0.004 0.004Hired workers 0.037 0.019 ***Household labor 0.034 0.009 ***Yield (pineapple per acre) 15780 18259 ***Quantity sold (in Kg) 23486 36235 ***Average local price (GHS per Kg) 0.210 0.131 ***Average export price (GHS per Kg) 0.251 0.196 ***Share sold on local market 0.495 0.354 ***Revenue (GHS per Kg) 0.219 0.170 ***Production costs (GHS per Kg) 0.105 0.118Profits (GHS per Kg) 0.114 0.052 ***ROI 2.760 1.800 ***Initial certification costs (GHS) 70.497 444.116 ***Renewal of certification (GHS) 0.732 93.089 ***Amortization (years) 0.083 0.283 ***

20. Descriptive statistics of economic variables Introduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion PRODUCTIONVariable Organic Conventional COST Farmers FarmersAgricultural equipment 0.002 0.009 ***Agricultural inputs 0.011 0.077 ***Renewal of certification 0.000 0.006 ***Land used for pineapple 0.004 0.004Hired workers 0.037 0.019 ***Household labor 0.034 0.009 ***Yield (pineapple per acre) 15780 18259 ***Quantity sold (in Kg) 23486 36235 ***Average local price (GHS per Kg) 0.210 0.131 ***Average export price (GHS per Kg) 0.251 0.196 ***Share sold on local market 0.495 0.354 ***Revenue (GHS per Kg) 0.219 0.170 ***Production costs (GHS per Kg) 0.105 0.118Profits (GHS per Kg) 0.114 0.052 ***ROI 2.760 1.800 ***Initial certification costs (GHS) 70.497 444.116 ***Renewal of certification (GHS) 0.732 93.089 ***Amortization (years) 0.083 0.283 ***

21. Descriptive statistics of economic variables Introduction Data Framework Empirical Strategy I Empirical Strategy II ConclusionVariable Organic Conventional Farmers FarmersAgricultural equipment 0.002 0.009 ***Agricultural inputs 0.011 0.077 ***Renewal of certification 0.000 0.006 ***Land used for pineapple ROI 0.004 0.004Hired workers 0.037 0.019 ***Household labor 0.034 0.009 ***Yield (pineapple per acre) 15780 18259 ***Quantity sold (in Kg) 23486 36235 ***Average local price (GHS per Kg) 0.210 0.131 ***Average export price (GHS per Kg) 0.251 0.196 ***Share sold on local market 0.495 0.354 ***Revenue (GHS per Kg) 0.219 0.170 ***Production costs (GHS per Kg) 0.105 0.118Profits (GHS per Kg) 0.114 0.052 ***ROI 2.760 1.800 ***Initial certification costs (GHS) 70.497 444.116 ***Renewal of certification (GHS) 0.732 93.089 ***Amortization (years) 0.083 0.283 ***

22. Descriptive statistics of economic variables Introduction Data Framework Empirical Strategy I Empirical Strategy II ConclusionVariable Organic Conventional Farmers FarmersAgricultural equipment 0.002 0.009 ***Agricultural inputs 0.011 0.077 ***Renewal of certification 0.000 0.006 ***Land used for pineapple 0.004 0.004Hired workers 0.037 0.019 ***Household labor 0.034 0.009 ***Yield (pineapple per acre) 15780 18259 ***Quantity sold (in Kg) 23486 36235 ***Average local price (GHS per Kg) 0.210 0.131 ***Average export price (GHS per Kg) 0.251 0.196 ***Share sold on local market 0.495 0.354 ***Revenue (GHS per Kg) 0.219 CERTIFICATION 0.170 ***Production costs (GHS per Kg) 0.105 0.118Profits (GHS per Kg) 0.114 0.052 COST ***ROI 2.760 1.800 ***Initial certification costs (GHS) 70.497 444.116 ***Renewal of certification (GHS) 0.732 93.089 ***Amortization (years) 0.083 0.283 ***

23. Intensity of agro-ecological practice use and certificationIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

24. Endogeneous switching regressionIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

25. ESR ctd.Introduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

26. ESR in detailIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

27. ESR in detailIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion

28. Results of ESR for impact of organic certification on agro-ecological practice use Selection Eq. Organic farmers Convent. farmersVariable Coefficient Coefficient CoefficientGENDER -0.122 0.173 1.769AGE 0.004 -0.006 -0.056 **NATIVE -0.151 0.443 0.401RISK 0.306 *** -0.133 0.135HHSIZE -0.058 -0.146 -0.068EDUC -0.094 * 0.323 ** 0.135WEALTH -0.296 *** 0.397 *** 0.138FSIZE -0.012 -0.006 0.0001OWNLAND 0.586 ** 1.051 ** 0.927EXPER 0.034 0.020 0.024LEARN1 0.829 ** 1.053 -0.774LEARN2 -0.537 ** 0.357 -0.223DIST -0.341 ** -0.130 -0.947 **SOIL 0.008 -0.316 *** -0.268 ***ORGA 1.403 *** -1.232 * 0.828ENV 1.431 *** -1.423 *** 0.038GOVERN 0.445 ***BANK -0.468 0.403CREDIT -0.526 -0.239VARIETYMD2 2.550 *** -0.128HIRED -0.569 0.452INSPECT -0.113 0.074 **CONTR 1.154 ** -0.083CERTIFYEARSNO 0.299 ** -0.203INTERCEPT 1.038 1.027 3.455 ** -0.320 0.260 0.916 *** 0.744 ***

29. Estimation results of generalized propensity scoreIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion Variable Coefficient Std. Err. Equation 1 ORGANIC 0.165 *** 0.026 GENDER 0.050 0.052 AGE -0.005 ** 0.002 RISK 0.019 0.048 HHSIZE -0.041 *** 0.018 EDUC 0.101 ** 0.079 FSIZE 0.003 ** 0.001 OWNLAND 0.283 *** 0.096 EXPER 0.042 * 0.021 LEARN1 -0.101 * 0.060 LEARN2 0.108 * 0.074 DIST -0.152 0.135 ORGA -0.126 0.114 SOIL -0.112 *** 0.022 WEALTH 0.165 *** 0.071 ENV 0.266 ** 0.170 INTERCEPT 0.935 *** 0.149 Equation 2 INTERCEPT 0.31 *** 0.014

30. Estimation results of the coefficients of the dose response functionIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion Variable Coefficient Std. Err. T -0.305 ** 0.121 T2 0.019 *** 0.004 GPS -3.252 ** 1.401 T * GPS 0.385 0.259 INTERCEPT 4.638 *** 1.251

31. Robustness checks GPSMIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion No weights Different weighting scheme Restricted to values < 13 Weeding excluded

32. Pro and contra organic agricultureIntroduction Data Framework Empirical Strategy I Empirical Strategy II ConclusionEconomic Economic High prices Low yields High entry costs and complexity Time lag of benefitsSocial Social Cultural proximity to traditional Lower food security through farming lower yields Dependency on external inputs Benefits are partly public Human capital based High labor intensityEnvironmental Environmental Low pollution Soil mining Higher CO2 storage of soil No lower emissions per unit Little use of fossil fuels (only per area) High resilience

33. Sustainability in agricultureIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion Maximize the productivity of the land and improve the well-being of people with minimal damage to natural resources (land, water, air, and biodiversity) (Pretty, 1999)

34. The pineapple sector in GhanaIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion Varieties: MD2 (new export), Smooth Cayenne (old export), Sugar Loaf (local) and Queen Victoria (high value) Exports since the 1980ies Seasonal export market Exports of Pineapple from Ghana 80 000 70 000 60 000 50 000 Sea MT 40 000 30 000 Air 20 000 Total 10 000 - 2002 2004 2006 2008 2010 2012 Year

35. Actors in the pineapple sectorIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion Smallholders Local buyers Advi ce, MoFA Train ing Export Processors companies Development Agrencies, NGOs Large farms

36. Organic Conventional

37. Horticulture in GhanaIntroduction Data Framework Empirical Strategy I Empirical Strategy II Conclusion Reach development impact Build on Existing Capacity