Application of perpetual rent model to valorisation of agricultural land*

Bazyli Czyżewski and Jan Polcyn

No 252638, Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej from Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI)

Abstract: The concept of creating public goods by land factor is often considered in literature, but its theoretical foundations are quite debatable. The theories of land rent in mainstream economics stand at the position that land factor alone does not create any utility, which means that it does not have any “intrinsic utility”. Only by changing this assumption, it is possible to reconsider a theoretical model for provision of public goods by agriculture. The authors wonder which model of value can be applied to valuate agricultural land so as to make it reflect its intrinsic utility. They propose to adopt the neoclassical Gordon’s model of perpetual rent. The theoretical aim of the article is to interpret the relationships described in this model for the market of agricultural land. The empirical goal is to assess the long-term growth rate of land rent from the Gordon’s model in the 16 regions (voivodeships) of Poland and in the cross-section of different acreages. Paradoxically, it turns out that the neoclassical model is well-fitted to the market of agricultural land in the long term, despite the far-reaching institutional regulation of this market and it provides a basis for quantification of the intrinsic land utility.

Keywords: Agribusiness; Community/Rural/Urban Development; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 16
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iafepa:252638

DOI: 10.22004/ag.econ.252638

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