Journal
ECONOMIC MODELLING
Volume 117, Issue -, Pages -Publisher
ELSEVIER
DOI: 10.1016/j.econmod.2022.106044
Keywords
Cox proportional hazards model; Farmland supply; Land market liquidity; Land price uncertainty; Real options model; Duration model
Categories
Funding
- German Research Foundation (DFG)
- Agricultural Land Markets - Efficiency and Regulation?
- [2569?]
Ask authors/readers for more resources
This paper investigates the heterogeneity in liquidity of agricultural land markets and explores the effects of returns and price volatility on land sales timing. Non-agricultural investors do not trade land more frequently than farmers. The findings contribute to the discussion on land market regulations and suggest that capping land prices may discourage land sales and decrease land supply.
This paper investigates the observed heterogeneity in the liquidity of agricultural land markets. We adopt a real options model to determine the value of an opportunity to sell farmland and derive the optimal disinvestment triggers. A proportional hazards model is applied to estimate the duration between land sales in Germany and test the implications of the real options model. In contrast to expectations, we find an ambiguous effect of returns and price volatility on the optimal timing of land sales. There is no evidence that non-agricultural investors buy and sell land more frequently than farmers. Our results contribute to the current discussion on land market regulations, one major point of which is capping land prices. According to our results, such policies could in-crease the rent-price ratio and thus discourage land sales. In turn, the land supply would be reduced, causing further price pressure on farmland markets.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available