Environmental Regulation and Productivity: A Data Envelopment Analysis for Swiss Dairy Farms

We propose a test of the Porter hypothesis for Swiss dairy farms, using a data envelopment analysis allowing for inclusion of policy variables to account for the effects of environmental policy on farm performance. It was found that on average, the Malmquist index including environmental indicators was 0.3% greater than the Malmquist index ignoring environmental indicators. However, we find considerable heterogeneity in the relationships between farm productivity and environmental regulation. The analysis of farm level productivity for Swiss dairy farms provides results supporting the view that during the 1993-2001 period, there is no strong evidence that farm productivity increased due to environmental agreements. Our findings are mixed but do not seem to reject the Porter hypothesis.