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An experimental analysis of German farmers’ decisions to buy or rent farmland

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  • Danne, Michael
  • Buchholz, Matthias
  • Musshoff, Oliver

Abstract

Farmland is a principal production factor in agricultural production. Farmers have the opportunity to buy or to rent farmland. In this paper, we apply a discrete choice experiment (DCE) to analyze farmers’ individual buying and rental decisions for farmland. The net present value (NPV) is used as normative benchmark to evaluate farmers’ decisions in the experiment. Sociodemographic and business variables as well as farmers expectations about developments of farmland prices are used as covariates in the econometric analysis. Our results reveal that farmers have a higher willingness to buy than to rent farmland. Covariates as the farm size and the farmers risk attitude influence the farmers’ decisions in the DCE while no effect was observable for the individual expected purchase price change. Finally, we find that farmers act only in nearly the half of all decision in accordance with the NPV.

Suggested Citation

  • Danne, Michael & Buchholz, Matthias & Musshoff, Oliver, 2019. "An experimental analysis of German farmers’ decisions to buy or rent farmland," 165th Seminar, April 4-5, 2019, Berlin, Germany 288295, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaa165:288295
    DOI: 10.22004/ag.econ.288295
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    Keywords

    Land Economics/Use;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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