Price transmission between GMO-free organic and conventional milk in Austria

Soo-Eun Kim and Jun Ho Seok

Abstract: This study investigates a milk price relationship between organic and conventional milk in Austria. We employ a vector error correction model, Johansen co-integration, and threshold co-integration test to establish whether organic and conventional milk markets are integrated and have asymmetric price relationships. Our results show no existence of threshold co-integration compared to linear co-integration. Our findings also present a price leadership of organic on conventional milk in a long-run. In a short-run, our results indicate while organic milk price has a positive effect on conventional milk price, conventional milk price does not have a significant effect on conventional one price.

Keywords: organic milk; price transmission; Threshold co-integration test; Vector error correction model

Date published: 2022-03-11