Behavioral responses to regulatory push and market pull instruments: Experimental evidence from Danish agriculture

This study examines how Danish farmers respond to two policy instruments, a tax on conventional farming and a market premium for climate-smart agriculture (CSA), when making land allocation decisions between conventional and CSA. Using a lab-in-the-field experiment with 251 farmers randomly assigned to control, tax, or premium treatments, we compare behavioral responses within the same context. Both instruments significantly increase CSA land allocation relative to the control group. On average, CSA allocation increases by approximately 5 ha (ha) under the tax treatment and 5.5 ha under the premium treatment, corresponding to increases of about 33% relative to the control mean. However, treatment effects vary across production systems: farmers already engaged in organic farming exhibit higher baseline CSA allocation but more moderate adjustments, whereas non-organic farmers show stronger behavioral adjustments. The findings suggest that a regulatory tax and a market-based premium influence land-use decisions and may address different adoption barriers across farmer groups, even when providing similar economic incentives. These findings highlight the importance of accounting for farmer heterogeneity and suggest that tailoring policy mixes to different production systems and sustainability orientations may enhance behavioral change toward agricultural sustainability.