Evaluating internalization of multifunctionality by farm diversification: Evidence from educational dairy farms in Japan

Farm diversification by farmers' open-door policy generates opportunities for farmers to internalize externalities of multifunctionality. Although the educational function of agriculture is an example of such an open-door policy and is attracting growing attention, this function has been little explored. To promote farm diversification in this direction, this paper examined how and to what degree farmers internalize externalities of multifunctionality by focusing on the educational function provided by dairy farming, i.e., farming experience services, in Japan. The main findings were as follows. First, we can say that the educational function is determined by ordinary technical jointness as well as institutional jointness, which is represented by food culture and the agrarian heritage. Both the technical and institutional jointness enhanced the externality. Because of these two working factors, there is a U-shaped relationship between farm diversification and provision of farming experience services. Second, however, an empirical evaluation indicated that farmers only partially internalize educational externalities by treating them as supplementary services combined with processed milk products. Therefore, appropriate integrated management of these newly emerging educational services to become a viable market should be fully addressed in the future, especially for family farms.