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Can Agricultural Disaster Relief Programs Affect Farmland Prices? Empirical Evidence from Farmland Transaction Data

Tzong-Haw Lee (), Hung-Hao Chang (), Yi-Ting Hsieh () and Bo-Yuan Chang ()
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Tzong-Haw Lee: School of Economics and Management, Hubei Polytechnic University, No. 16 North Road, Guilin 435003, China
Yi-Ting Hsieh: Department of Agricultural Economics, National Taiwan University, No. 1 Roosevelt Road, Section 4, Taipei 10617, Taiwan
Bo-Yuan Chang: Graduate School of Engineering Science and Technology, National Yunlin University of Science and Technology, 123 University Road, Section 3, Douliou 64002, Taiwan

Land, 2021, vol. 10, issue 7, 1-14

Abstract: The literature on the capitalization of agricultural policies documents that government subsidies can increase farmland values with attesting empirical evidence found in a variety of agricultural programs. This study argues that the well-documented capitalization effect of agricultural subsidies on farmland prices may not be directly related to the agricultural disaster relief program (ADRP). On the one hand, disaster relief payments can positively capitalize into farmland prices. On the other hand, disaster shocks may result in farm income loss which can decrease farmland prices. This paper empirically examines the overall effect of the ADRP on farmland prices in Taiwan. A unique dataset on 97,864 parcels of farmland transacted in the farmland market is used. By estimating the fixed effect and instrumental variable fixed effect model, a negative overall effect of the incidence and the level of ADRP payments on farmland prices is evident. Moreover, the effect is more pronounced among farmland located in urban areas. This finding provides evidence that the negative stigmatized effect dominates the positive capitalization effect of the ADRP payments on farmland values, especially for farmland located in urban areas (JEL Q15, Q18, Q54).

Keywords: farmland prices; farmland transaction; agricultural disaster relief program (ADRP); capitalization effect (search for similar items in EconPapers)
JEL-codes: Q15 Q2 Q24 Q28 Q5 R14 R52 (search for similar items in EconPapers)
Date: 2021
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