This study examines the difference in the economic performance between organic farming and conventional farming in Fuli, so as to evaluate the economic effect of the government's policy in promoting this environmentallyfriendly farming practice. Based on our analysis, concrete and practical policy recommendations are made for the extension of organic farming. Methodologically speaking, the endogeneity problem of technology adoption leading to biased estimates is a major concern when comparing the economic outcomes between the technology adopters and non-adopters. This study thus applies the propensity score matching method to correct for the endogeneity problem. It is found that the original differences, in kurtosis and peak of the distributions of organic and conventional farming, are eliminated by propensity score matching. The result is further confirmed by the Wilcoxon signed rank test. Investigation of the economic outcomes of organic farming suggests the margin between the two types of rice cannot sufficiently compensate for the reduction in the output level of organic rice, which thus leads to some adverse economic impacts. Policy options that the authorities can take to provide economic incentives to organic farming, such as subsidy and efficient modes of production or field management, are promising directions for the extension of organic farming in Taiwan.
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