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Abstract
This paper investigates regional cluster of organic grassland farms with respect to technical efficiency. The data-base consists of organic grassland and mixed farms in Germany from 1994/95 to 2005/06. In a first step five inputs and one output are analyzed by means of a stochastic frontier production function, allowing for heteroscedasticity and technical effects. The selection of determinants of technical efficiency is based on location theory. Since organic farming has regional centers, technical efficiency (TE) of organic farms is found to be affected by regional variables (such as agglomeration effects). In a second step we identified regional clusters of organic farms and analyzed the technical efficiency of the regional clusters. The results show that organic farms in distinct regions show different efficiency performance - suggesting that there are agglomeration and urbanization effects in the organic market.