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Stigmatized versus Capitalization Effect on Farmland Prices - Application to the Agricultural Disaster Relief Program in Taiwan

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  • Chang, H.H.

Abstract

Literature on capitalization of agricultural policies documents that government subsidies can increase farmland values, and empirical evidence has been found in a variety of agricultural programs. However, little attention has been paid on agricultural disaster relief programs (ADRP). This paper argues that the well-documented capitalization effect of agricultural subsidies on farmland prices may not be directly applied to the ADRP because disaster shocks may also result in a negative effect on farmland values due to their stigmatized effect on the affected farmland. This paper empirically examines the effect of the ADRP payments on farmland prices using the case of Taiwan as an illustration. A unique dataset of 97,864 parcels of farmland transacted in the farmland market is used. Information of ADRP payments was drawn from the administrative profile. By estimating the fixed effect and instrumental variable fixed effect model, a negative effect of the incidence and level of the ADRP payments on farmland prices is evident. Moreover, the effect is more pronounced among farmland that is located in urban areas. This finding provides evidence that the negative stigmatized effect dominants the positive capitalization effect of the ADRP payments on farmland values, especially for farmland that is located in urban areas. Acknowledgement : The author thanks technical assistance provided from the Council of Agriculture, Ministry of Interior, the Central of Weather Bureau in Taiwan. This project was supported by the Ministry of Science and Technology of Taiwan under Grant No.106-2410-H-002-019-MY2. The views expressed herein are those of the author and do not reflect the policies of the institutes above. All remaining errors are mine.

Suggested Citation

  • Chang, H.H., 2018. "Stigmatized versus Capitalization Effect on Farmland Prices - Application to the Agricultural Disaster Relief Program in Taiwan," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276977, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:276977
    DOI: 10.22004/ag.econ.276977
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