Exit dynamics from organic certification in Quebec

Abstract

In Quebec, organic‐certification exits remained persistently high at 5% –7% annually over 2021–2025, while entries fell sharply from 10.8% to 3.4%. By 2025, exits exceeded entries for the first time, contracting the certified stock and reversing a decade of expansion. Using enterprise‐level data spanning all product categories, this paper documents three life‐cycle exit patterns from organic certification. First, the exit hazard follows an inverted‐U shape, peaking around the third year. Second, more than 50% of exits occur within five years of certification. Third, enterprises certified in more product categories face lower exit risk. A calibrated dynamic model with heterogeneous time preferences and idiosyncratic pest shocks can account for the observed hump‐shaped hazard through the differential exit of impatient versus patient producers, and a declining tail consistent with the selection of more patient producers over time. Policy counterfactuals indicate that an 80% pesticide tax raises ten‐year survival from 81.0% to 89.3%, while a 1% productivity penalty in organic production lowers 10‐year survival to 71.8%. These results suggest that long‐term retention is shaped by behavioural heterogeneity in time preferences and exposure to ecological (pest) risk. The findings point toward policies that combine early transitional support with measures that reduce pest‐related risks.