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The Valuation of Agricultural Land and the Influence of Government Payments

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  • Feichtinger, Paul
  • Salhofer, Klaus

Abstract

This study gives an overview of the theoretical foundations, empirical procedures and derived results of the literature identifying determinants of land prices. Special attention is given to the effects of different government support policies on land prices. Since almost all empirical studies on the determination of land prices refer either to the net present value method or the hedonic pricing approach as a theoretical basis, a short review of these models is provided. While the two approaches have different theoretical bases, their empirical implementation converges. Empirical studies use a broad range of variables to explain land values and we systematise those into six categories. In order to investigate the influence of different measures of government support on land prices, a meta-regression analysis is carried out. Our results reveal a significantly higher rate of capitalisation for decoupled direct payments and a significantly lower rate of capitalisation for agri-environmental payments, as compared to the rest of government support. Furthermore, the results show that taking theoretically consistent land rents (returns to land) and including non-agricultural variables like urban pressure in the regression implies lower elasticities of capitalisation. In addition, we find a significant influence of the land type, the data type and estimation techniques on the capitalisation rate.

Suggested Citation

  • Feichtinger, Paul & Salhofer, Klaus, 2011. "The Valuation of Agricultural Land and the Influence of Government Payments," Working Papers 119103, Factor Markets, Centre for European Policy Studies.
  • Handle: RePEc:ags:famawp:119103
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    Cited by:

    1. Saguatti, Annachiara & Erickson, Kenneth & Gutierrez, Luciano, 2014. "Spatial panel models for the analysis of land prices," 2014 Third Congress, June 25-27, 2014, Alghero, Italy 172997, Italian Association of Agricultural and Applied Economics (AIEAA).
    2. Élodie Letort & Chalachew Temesgen, 2014. "Influence of environmental policies on farmland prices in the Bretagne region of France," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 95(1), pages 77-109.
    3. Hansen, Marc & Conteh, Mohamed & Shakya, Martina & Löwenstein, Wilhelm, 2016. "Determining Minimum Compensation for Lost Farmland: a theory-based impact evaluation of a land grab in Sierra Leone," IEE Working Papers 211, Institut fuer Entwicklungsforschung und Entwicklungspolitik, Ruhr-Universitaet Bochum.
    4. Saguatti, Annachiara & Erickson, Kenneth & Gutierrez, Luciano, 2014. "Spatial panel models for the analysis of land prices," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182757, European Association of Agricultural Economists.

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    Keywords

    Agricultural and Food Policy; Land Economics/Use;

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