Passive farming and land development: a real option approach

Luca Di Corato () and Mark Brady

No 2016:4, Working Paper Series from Swedish University of Agricultural Sciences, Department Economics

Abstract: We examine the impact that subsidies paid to passive farmers have on the lease of land and on the speed of land development. First, we find that, even if delaying land development, paying passive farmers increases the value of the land. Second, when bargaining for the lease of land, we show that the agreement between the parties is conditional on an underlying development project passing a threshold level in terms of profitability. Third, we identify the conditions leading to a Pareto improvement. Last, we illustrate our findings by considering the establishment of an energy crop on leased land.

Keywords: Real Options; Land development; Passive Farming; Nash Bargaining (search for similar items in EconPapers)
JEL-codes: C61 Q15 R14 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2016-04-15
New Economics Papers: this item is included in nep-agr and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Passive farming and land development: A real options approach (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:slueko:2016_004

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