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The Incidence of EU Per-Hectare Payments on Farmland Rental Rates: A Spatial Econometric Analysis of German Farm-Level Data

Authors

  • Gunnar Breustedt,

  • Hendrik Habermann

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    • Both Gunnar Breustedt and Hendrik Habermann are with the Department of Agricultural Economics, University of Kiel, Olshausenstrasse 40, 24118 Kiel, Germany. E-mail: gbreustedt@agric-econ.uni-kiel.de for correspondence. The authors thank S. Hohls from Landdata Ltd. for providing farm data and the Studienstiftung des Deutschen Volkes for financial support. They are also grateful to two anonymous referees for critical and constructive comments that improved the article. Finally, the authors wish to thank the journal’s editor for helpful comments and suggestions.


Abstract

This article analyses determinants for 2001 farmland rental prices from 3,819 farms in Germany. Based on specification tests we estimate a general spatial model to account for both spatial relationships among rental prices of neighbouring farmers and spatially autocorrelated error terms. A €1 per hectare higher rental price in a farmer’s neighbourhood coincides with a €0.72 higher rental price paid by the farmer. The marginal incidence of EU per-hectare payments paid for eligible arable crop land on rental rates amounts to €0.38 for each additional €1 of premium payments. Regional livestock density, which is indirectly influenced by different policies, is also a major determinant of rental prices. Results are confirmed by sensitivity analyses. Consequently, German farmland rental rates are heavily influenced by agricultural policy instruments and therefore, these policies exhibit substantial distributional effects.

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