Institutional Factors Affecting Agricultural Land Markets

Contents
1. Introduction ........................................................................................................................... 1
2. Impact of the common agricultural policy ............................................................................ 1
2.1 Capitalisation of coupled subsidies ............................................................................. 2
2.2 Capitalisation of decoupled subsidies ......................................................................... 2
2.3 Determinants of subsidy capitalisation ....................................................................... 3
2.3.1 Policy type ........................................................................................................... 3
2.3.2 Policy implementation details ............................................................................ 3
2.3.3 Accompanying policy measures ......................................................................... 4
2.4 Empirical evidence on the impact of subsidies on land prices ................................... 4
3. Other policies ......................................................................................................................... 6
4. Land market institutions and regulations ............................................................................ 6
5. Transaction costs ................................................................................................................... 7
5.1 Explicit transaction costs ............................................................................................. 7
5.2 Implicit transaction costs ............................................................................................. 9
5.2.1 Imperfect competition in the agricultural land market .................................... 9
5.2.2 Imperfections in property rights ...................................................................... 10
5.2.3 High withdrawal costs and unclear boundaries .............................................. 12
6. Credit market constraints and profitability ........................................................................ 13
7. Contract enforcement .......................................................................................................... 13
8. Alternative land use ............................................................................................................. 14
9. Social capital ........................................................................................................................ 15
References ................................................................................................................................... 16
List of Figures
Figure 1. Correlation between the share of land used by corporate farms and rented land ..... 9
Figure 2. Land sales prices by size of parcel in 2005 in Slovakia (SKK/ha)............................ 15
List of Tables
Table 1. Estimated impact of subsidies on farmland rents ...................................................... 4
Table 2. Estimated impact of subsidies on farmland values .................................................... 5
Table 3. Land taxes: Registration tax (% of land value) ........................................................... 7
Table 4. Transaction costs related to the land market in Poland ............................................ 8
Table 5. Agricultural land rental prices by legal entity (€/ha) ............................................... 10