Estimation of impact of participation in public green procurement of food on farm numbers in rural Latvian counties

Green Public Procurement (GPP) of food in Latvia is a tool that directly provides the increase in sales of local food products via purchases by local communities and state institutions in sectors such as education, defence, interior, healthcare and welfare. Public procurement within the framework of GPP ensures that the purchase of the food products or catering services minimizes the environmental impact while having positive social consequences. The share of local farms in the total directly provided product volumes within GPP is minor and the bulk of the farm produce goes through wholesale, food processing and public catering companies. The Latvian agriculture is experiencing continuous structural changes with the consolidation and decrease in farm numbers. The rate of the farm “disappearance” in rural counties with companies participating in the food GPP is similar to the counties without such companies. This could lead to the expectations that changes in the farm numbers are not affected by participation in GPP. While the previous research on the impact of GPP in the European countries has extensively focused on the environmental, economic and social issues, the causal inference with respect to changes in farm numbers has not been addressed. Coarsened exact matching (CEM) is the method for the estimation of the causal effects that has been widely applied to observational data. The advantages of CEM are associated with the reduction of the differences between multivariate distributions of covariates in treatment and control groups by pruning the data with splitting into pre-determined bins. The research objective is to evaluate the net impact of the participation in GPP by a rural county on the number of farms in this county. Considering the participation in GPP as a treatment variable in the rural county panel data, the results of CEM reveal positive net impact on the farm numbers in the treated counties. Albeit the direct farm participation in food GPP is negligible, the participation of other companies in food GPP has positive net direct impact on farm numbers. Participation in a food GPP over the period from 2018 to 2020 has contributed to sustainability of 2179 farms. Considering that only about 21% of rural communities have direct participation in food GPP, a modification of the National regulation of GPP towards an increased preferences for local suppliers would improve the resilience of the farming sector.