Should I farm or should I not?

Luca Di Corato () and Dimitrios Zormpas

No 261110, 2017 International Congress, August 28-September 1, 2017, Parma, Italy from European Association of Agricultural Economists

Abstract: In this paper we use stochastic dynamic programming for modelling the investment decision of a landowner contemplating the conversion of idle land to farmland. The landowner may, by investing, develop land for active farming counting, whenever farming is not protable, on the support secured by the CAP for land kept in good agricultural and environmental condition, i.e. land "passively" farmed. We determine, under the current CAP frame, the optimal capital intensity and the optimal investment timing and show that, if compared to a scenario where no support is provided, land development occurs earlier in expected terms and the associated capital intensity is lower. Our results contradict arguments against the support paid to farmers that passively manage their land and show that the current policy frame allows maintaining land in good state at limited cost in terms of excess capacity.

Keywords: Land; Economics/Use (search for similar items in EconPapers)
Pages: 17
Date: 2017-08-28
New Economics Papers: this item is included in nep-agr
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae17:261110

DOI: 10.22004/ag.econ.261110

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