Valuation of agricultural externalities: analysis of alternative methods

The paper focuses on the analysis of agricultural externalities and their valuation methods. Agricultural activity beyond supplying food and fibre, can also be instrumental in forming the landscape, providing natural resources, and preserving biodiversity. Furthermore, agriculture contributes to the achievement of societal goals such as the viability of rural areas and their development, food security, and preservation of cultural heritage. Positive externalities of agriculture assert in the form of public goods, whereas intensive environmentally unbalanced agricultural activity causes damage to the environment. The objectives of this paper are to define agricultural externalities and to analyse methods of their valuation. In order to achieve the research aim, characteristics of agricultural externalities in farming systems have been analysed; evaluation methods of the benefit and cost of externalities in farming systems, revealing their advantages and disadvantages have been examined, and scientific studies on evaluation of externalities have been reviewed. Methods of systemic and logic analysis were applied for analysis of agricultural externalities and their evaluation. The analysis has showed that stated preference methods are commonly used for determination of the positive externalities. The most limited methods are travel cost and hedonic pricing methods, which are suitable only for the evaluation of public goods related toVytauto Didžiojo universitetasŽemės ūkio akademij