The Valuation of Agricultural Land and the Influence of Government Payments

Paul Feichtinger and Klaus Salhofer

No 119103, Working papers from Factor Markets, Centre for European Policy Studies

Abstract: This study gives an overview of the theoretical foundations, empirical procedures and derived results of the literature identifying determinants of land prices. Special attention is given to the effects of different government support policies on land prices. Since almost all empirical studies on the determination of land prices refer either to the net present value method or the hedonic pricing approach as a theoretical basis, a short review of these models is provided. While the two approaches have different theoretical bases, their empirical implementation converges. Empirical studies use a broad range of variables to explain land values and we systematise those into six categories. In order to investigate the influence of different measures of government support on land prices, a meta-regression analysis is carried out. Our results reveal a significantly higher rate of capitalisation for decoupled direct payments and a significantly lower rate of capitalisation for agri-environmental payments, as compared to the rest of government support. Furthermore, the results show that taking theoretically consistent land rents (returns to land) and including non-agricultural variables like urban pressure in the regression implies lower elasticities of capitalisation. In addition, we find a significant influence of the land type, the data type and estimation techniques on the capitalisation rate.

Keywords: Agricultural and Food Policy; Land Economics/Use (search for similar items in EconPapers)
Pages: 24
Date: 2011-12-14
New Economics Papers: this item is included in nep-agr
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Citations: View citations in EconPapers (10)

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Working Paper: The Valuation of Agricultural Land and the Influence of Government Payments (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:famawp:119103

DOI: 10.22004/ag.econ.119103

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