The Role of Environmental and Land Transaction Regulations on Agricultural Land Price: The example of Brittany. Factor Markets Working Document No. 52, June 2013

Using data from individual transactions for the period 1994-2010 in the French NUTS2 region Brittany, the authors investigated how environmental regulations and transaction land regulations influence the price of sold plots. Regressions on three sub-samples of buyers were performed in order to assess whether different buyers have different attitudes or plans regarding the farmland purchased: a sub-sample including only farmer-buyers, a sub-sample including non-farmer individual buyers, and a sub-sample including non-farmer non-individual buyers. Estimations were performed ignoring and accounting for spatial interactions (model SARAR). Results indicate that the price of land decreases when buyers are farmers, that the nitrate surplus area zoning increases the price of land, even more so for farmer-buyers. Regarding land transaction regulations, there is a negative effect, on land price, of the purchaser being the current tenant or being the land regulating public body SAFER. Estimating the model on different sub-samples depending on the buyers’ type shed light on the factors that are more important for each buyer.

Influence of Agricultural Support on Sale Prices of French Farmland: A comparison of different subsidies, accounting for the role of environmental and land regulations. Factor Markets Working Document No. 51, June 2013

This paper investigates the determinants of agricultural land price in several regions in France over the period 1994-2011, using individual plot transaction data, with a particular emphasis on agricultural subsidies and nitrate zoning regulations. It found a positive but relatively small capitalisation effect of the total subsidies per hectare. The data revealed that agricultural subsidies capitalised, at least to some extent, but the magnitude of such a capitalisation depends on the region considered, on the type of subsidy considered, and on the location of the plot in a nitrate surplus zone or not. Only land set-aside premiums significantly capitalise into land price, while single farm payments have a significant positive capitalisation impact only for plots located in a nitrate-surplus zone.

The Empirical Content of the Present Value Model: A survey of the instrumental uses of farmland prices. Factor Markets Working Document No. 53, June 2013

After reviewing the Present Value Model (PVM), in its basic form and with its major extensions, the authors carried out a literature review on the instrumental uses of farm land prices; namely what land prices may reveal in the framework of the PVM. Urban influence, non-market goods and climate change are topics where the PVM used with applied data may reveal farmers’ or landowners’ beliefs or subjective values, which are discussed in this paper. There is also extensive discussion of the topic of public regulations, and how they may affect land price directly, or through its present value.

Sales Market Regulations for Agricultural Land in EU Member States and Candidate Countries. Factor Markets Working Paper No. 14, February 2012

All agricultural markets are subjected to institutional regulations that – in one way or another –affect the functioning of these markets, and this is no different for the agricultural land market in the EU. In this paper, we describe the existing regulations in the sales markets for agricultural land in selected EU member states and candidate countries. The analysis focuses on three types of sales market regulations and institutions: quantity regulations, price regulations and transaction costs. The differences in the regulatory framework between land acquisition and ownership by domestic and foreign investors are analysed, as well as the taxes associated with land sales and ownership, zoning regulations and market imperfections.

Rental Market Regulations for Agricultural Land in EU Member States and Candidate Countries. Factor Markets Working Paper No. 15, February 2012

In this paper, we describe the regulations governing the rental markets for agricultural land in selected EU member states and candidate countries. The analysis focuses on various kinds of regulations and institutions connected with the land rental market, including price, tenancy duration, quantity and other regulations, as well as transaction costs. The diverse government regulations on price restrictions and tenancy duration are analysed, along with the social norms observed for rental payments and contracts. The paper also examines the type and registration of contracts, the contract enforcement rules, the regulations on the inheritability of contracts and the pre-emptive right of tenants to buy the land.

Influence of the Common Agricultural Policy and Heterogeneous Land Quality on Land Rent and Land Allocation. Factor Markets Working Paper No. 38, March 2013

Against the background of the current discussion about the EU’s common agricultural policy (CAP) after 2013, the question of the impact of government support on land prices is crucially important. Validation of the CAP’s success also hinges on a proper assessment of a choice of policy instruments. This study therefore has the objective of investigating on a theoretical basis the effects of different government support measures on land rental prices and land allocation. The different measures under consideration are the price support, area payments and decoupled single farm payments (SFPs) of the CAP. Our approach evaluates the potential impact of each measure based on a Ricardian land rent model with heterogeneous land quality and multiple land uses. We start with a simple model of one output and two inputs, where a Cobb-Douglas production technology is assumed between the two factors of land and non-land inputs. In a second step, an outside option is introduced. This outside option, as opposed to land use of the Ricardian type, is independent of land quality. The results show that area payments and SFPs become fully capitalised into land rents, whereas in a price support scheme the capitalisation depends on per-acreage productivity. Moreover, in a price support scheme and a historical model, the capitalisation is positively influenced by land quality. Both area payments and price supports influence land allocation across different uses compared with no subsidies, where the shift tends to be larger in an area payment scheme than in a price support scheme. By contrast, SFPs do not influence land allocation.

A Spatial Analysis of Agricultural Land Prices in Bavaria. Factor Markets Working Document No. 50, June 2013

This paper empirically analyses a dataset of more than 7,300 agricultural land sales transactions from 2001 and 2007 to identify the factors influencing agricultural land prices in Bavaria. We use a general spatial model, which combines a spatial lag and a spatial error model, and in addition account for endogeneity introduced by the spatially lagged dependent variable as well as other explanatory variables. Our findings confirm the strong influence of agricultural factors such as land productivity, of variables describing the regional land market structure, and of non-agricultural factors such as urban pressure on agricultural land prices. Moreover, the involvement of public authorities as a seller or buyer increases sales prices in Bavaria. We find a significant capitalisation of government support payments into agricultural land, where a decrease of direct payments by 1% would decrease land prices in 2007 and 2001 by 0.27% and 0.06%, respectively. In addition, we confirm strong spatial relationships in our dataset. Neglecting this leads to biased estimates, especially if aggregated data is used. We find that the price of a specific plot increases by 0.24% when sales prices in surrounding areas increase by 1%.