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Farmland rental rate and marginal return to land: A french FADN perspective

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  • Pierre Dupraz

    ()
    (Structures et Marchés Agricoles, Ressources et Territoires)

  • Chalachew Temesgen Jemberie

    ()
    (Structures et Marchés Agricoles, Ressources et Territoires, INRA)

Abstract

The paper examines the relationship between the cash rent and the shadow value of farmland to understand the French farmland market. The empirical analysis is restricted to French main grain crops, namely wheat, oil crops and other grain crops. The sample is an unbalanced panel of 35,089 observations, that includes 6,089 crop farms which are observed about 5 years each, during the period 1990 -2007. The shadow values of all quasi-fixed assets have been derived from a restricted variable profit function. The profit function was successively estimated and tested by three estimation strategies: pooled OLS, one-way fixed effect and random panel model. However, concluding remarks are based on the results of the fixed effect model because of its statistical significance. The result indicates that the shadow prices of land and labour were persistently diverging from there observed price. The average shadow value of farmland was estimated about 550€/ha/year which is five times higher than the average rental price of 112€/ha/year over the studied period. Implication for the behaviours of French farmland market has been drawn from this analysis.

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Bibliographic Info

Paper provided by Institut National de la Recherche Agronomique, France in its series Working Papers with number 221264.

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Length: 21 p.
Date of creation: 2012
Date of revision:
Publication status: Published in
Handle: RePEc:inr:wpaper:221264

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Keywords: Shadow values; cash rent; farmland price; net present value; restricted profit; fixed effect; prix de la terre; terre agricoleméthode empirique; culture céréalierefrance;

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  1. Jean-Paul Chavas & Alban Thomas, 1999. "A Dynamic Analysis of Land Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 81(4), pages 772-784.
  2. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, Econometric Society, vol. 55(1), pages 43-68, January.
  3. Lau, Lawrence J & Yotopoulos, Pan A, 1971. "A Test for Relative Efficiency and Application to Indian Agriculture," American Economic Review, American Economic Association, vol. 61(1), pages 94-109, March.
  4. Andrew J. Plantinga & Douglas J. Miller, 2001. "Agricultural Land Values and the Value of Rights to Future Land Development," Land Economics, University of Wisconsin Press, vol. 77(1), pages 56-67.
  5. Mishra, Ashok K. & Erickson, Kenneth W. & Moss, Charles B., 2001. "Valuing Farmland With Multiple Quasifixed Inputs," Proceedings: 2001 Regional Committee NC-221, October 1-2, 2001, McLean, Virginia, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition 132397, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  6. Maligaya, Arlyn R. & White, Fred C., 1989. "Agricultural Output Supply And Input Demand Relationships With Endogenous Land Rents," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, Southern Agricultural Economics Association, vol. 21(02), December.
  7. Luciano Gutierrez & Joakim Westerlund & Kenneth Erickson, 2007. "Farmland prices, structural breaks and panel data," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(2), pages 161-179, June.
  8. Miranowski, John, 1993. "Understanding Farmland Price Changes," Staff General Research Papers 10696, Iowa State University, Department of Economics.
  9. Lloyd, T A & Rayner, A J & Orme, C D, 1991. "Present-Value Models of Land Prices in England and Wales," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 18(2), pages 141-66.
  10. Falk, Barry L., 1991. "Formally Testing the Present Value Model of Farmland Prices," Staff General Research Papers 11093, Iowa State University, Department of Economics.
  11. Gao, Zhifeng & Featherstone, Allen M., 2008. "Estimating economies of scope using the profit function: A dual approach for the normalized quadratic profit function," Economics Letters, Elsevier, vol. 100(3), pages 418-421, September.
  12. Kotakou, Christina A., 2011. "Panel Data Estimation Methods on Supply and Demand Elasticities: The Case of Cotton in Greece," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, Southern Agricultural Economics Association, vol. 43(01), February.
  13. Alfons Weersink & Steve Clark & Calum G. Turvey & Rakhal Sarker, 1999. "The Effect of Agricultural Policy on Farmland Values," Land Economics, University of Wisconsin Press, vol. 75(3), pages 425-439.
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Cited by:
  1. Elodie Letort Author-X-Name- First: Elodie Author-X-Name- Last: Letort & Chalachew Temesgen, 2013. "Influence of environmental policies on farmland prices in the Bretagne region of France," Working Papers SMART - LERECO, INRA UMR SMART 13-06, INRA UMR SMART.

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