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Determinants of agricultural cash rents in Germany: A spatial econometric analysis for farm-level data

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  • Breustedt, Gunnar
  • Habermann, Hendrik
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    Abstract

    We empirically analyse the determinants of cash rent levels for agricultural land in Lower Saxony, Germany. We are the first to apply a spatial econometrics approach that accounts for two types of spatial dependence simultaneously to cash rent data at the farm-level. Our empirical results underline the usefulness of such an approach. Farm characteristics which serve as a proxy for the marginal value of rented acreage for the tenant as well as variables which represent local competition on the land market are significant. Among the farm characteristics, operating revenue per hectare, share of high-value crops, soil quality, share of rented acreage, share of arable land relative to rented acreage, and animal density are significant while, ceteris paribus, neither labour nor machinery/buildings per hectare nor farm size are significant. In particular, animal density at the regional level increases the cash rent, underlining the importance of local competition on the land market. The analysis also shows that subsidies which foster competition among farmers for rented land boost landlords’ incomes. Thus, evaluation of set-aside programs or evaluation of public support for investment in pig or poultry production or renewable energies has to take such side-effects into account.

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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 44462.

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    Date of creation: 2008
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    Handle: RePEc:ags:eaae08:44462

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    Related research

    Keywords: Cash rent; farm-level data; spatial econometrics; Land Economics/Use;

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    1. Bierlen, Ralph W. & Parsch, Lucas D. & Dixon, Bruce L., 1999. "How Cropland Contract Type And Term Decisions Are Made: Evidence From An Arkansas Tenant Survey," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 2(01).
    2. Lence, Sergio H. & Mishra, Ashok K., 2003. "The Impacts of Different Farm Programs on Cash Rents," Staff General Research Papers 11470, Iowa State University, Department of Economics.
    3. Michael J. Roberts & Barrett Kirwan & Jeffrey Hopkins, 2003. "The Incidence of Government Program Payments on Agricultural Land Rents: The Challenges of Identification," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 762-769.
    4. Fuchs, Clemens, 2002. "The Influence of Per-hectare Premiums on Prices for Rented Agricultural Area and on Agricultural Land Prices," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 51(8).
    5. Garth Holloway & Donald Lacombe & James P. LeSage, 2007. "Spatial Econometric Issues for Bio-Economic and Land-Use Modelling," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(3), pages 549-588, 09.
    6. Patton, Myles & Kostov, Philip & McErlean, Seamus & Moss, Joan, 2008. "Assessing the influence of direct payments on the rental value of agricultural land," Food Policy, Elsevier, vol. 33(5), pages 397-405, October.
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