IDEAS home Printed from https://ideas.repec.org/p/ags/aesc12/134954.html
   My bibliography  Save this paper

Farmland Rental Rate and Marginal Return to Land: A French FADN Perspective

Author

Listed:
  • Dupraz, Pierre
  • Temesgen, Chalachew

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.

Suggested Citation

  • Dupraz, Pierre & Temesgen, Chalachew, 2012. "Farmland Rental Rate and Marginal Return to Land: A French FADN Perspective," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134954, Agricultural Economics Society.
  • Handle: RePEc:ags:aesc12:134954
    DOI: 10.22004/ag.econ.134954
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/134954/files/Chalachew_Temesgen%20Jemberie_Paper%20%20for%20AES.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.134954?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Richard E. Just & John A. Miranowski, 1993. "Understanding Farmland Price Changes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(1), pages 156-168.
    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. Laure Latruffe & Yann Desjeux & Herve Guyomard & Chantal Le Mouël & Laurent L. Piet, 2008. "Study on the functioning of land markets in the EU member states under the influence of measures applied under the Common Agricultural Policy. Study for France," Working Papers hal-02822151, HAL.
    5. 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, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 18(2), pages 141-166.
    6. Luciano Gutierrez & Joakim Westerlund & Kenneth Erickson, 2007. "Farmland prices, structural breaks and panel data," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 34(2), pages 161-179, June.
    7. Ball, V. Eldon & Moss, Charles B. & Erickson, Kenneth W. & Nehring, Richard F., 2003. "Modeling Supply Response In A Multiproduct Framework Revisited: The Nexus Of Empirics And Economics," 2003 Annual meeting, July 27-30, Montreal, Canada 21981, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Ashok Mishra & Charles Moss & Kenneth Erickson, 2004. "Valuing farmland with multiple quasi-fixed inputs," Applied Economics, Taylor & Francis Journals, vol. 36(15), pages 1669-1675.
    9. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    10. Barry Falk, 1991. "Formally Testing the Present Value Model of Farmland Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(1), pages 1-10.
    11. 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.
    12. Kotakou, Christina, 2011. "Panel Data Estimation Methods on Supply and Demand Elasticities: The Case of Cotton in Greece," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 43(1), pages 111-129, February.
    13. Maligaya, Arlyn R. & White, Fred C., 1989. "Agricultural Output Supply and Input Demand Relationships with Endogenous Land Rents," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 21(2), pages 13-20, December.
    14. Allen M. Featherstone & Timothy G. Baker, 1987. "An Examination of Farm Sector Real Asset Dynamics: 1910–85," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 532-546.
    15. 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, vol. 21(2), pages 1-8, December.
    16. 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.
    17. Falk, Barry L., 1991. "Formally Testing the Present Value Model of Farmland Prices," Staff General Research Papers Archive 11093, Iowa State University, Department of Economics.
    18. 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, vol. 43(1), pages 1-19, February.
    19. Jean-Paul Chavas & Alban Thomas, 1999. "A Dynamic Analysis of Land Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 772-784.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chakir, Raja & Lungarska, Anna, 2015. "Agricultural land rents in land use models: a spatial econometric analysis," 150th Seminar, October 22-23, 2015, Edinburgh, Scotland 212641, European Association of Agricultural Economists.
    2. Letort, Élodie & Temesgen, Chalachew, 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 (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 95(1).
    3. Cord-Friedrich von Hobe & Marius Michels & Oliver Musshoff, 2021. "German Farmers’ Perspectives on Price Drivers in Agricultural Land Rental Markets—A Combination of a Systematic Literature Review and Survey Results," Land, MDPI, vol. 10(2), pages 1-22, February.
    4. Lungarska, Anna & Jayet, Pierre-Alain, 2014. "Geographical Labeling of Agri-Food Products and its Incidence on the Cross-Sectional Approach to Climate Change Impacts Assessment," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182746, European Association of Agricultural Economists.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. B. James Deaton & Chad Lawley, 2022. "A survey of literature examining farmland prices: A Canadian focus," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(2), pages 95-121, June.
    2. Albulena Basha & Wendong Zhang & Chad Hart, 2021. "The impacts of interest rate changes on US Midwest farmland values," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 81(5), pages 746-766, February.
    3. Laure Latruffe & Chantal Le Mouël, 2009. "Capitalization Of Government Support In Agricultural Land Prices: What Do We Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 659-691, September.
    4. Ay, Jean-Sauveur & Latruffe, Laure, 2013. "The Empirical Content of the Present Value Model: A survey of the instrumental uses of farmland prices," Working papers 157112, Factor Markets, Centre for European Policy Studies.
    5. Katchova, Ani L. & Sherrick, Bruce J. & Barry, Peter J., 2002. "The Effects Of Risk On Farmland Values And Returns," 2002 Annual meeting, July 28-31, Long Beach, CA 19660, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Mishra, Ashok K. & Moss, Charles B. & Erickson, Kenneth W., 2004. "Effect Of Debt Solvency On Farmland Values: A Panel Cointegration Approach," 2004 Annual meeting, August 1-4, Denver, CO 20261, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Patrick de Fontnouvelle & Sergio H. Lence, 2002. "Transaction Costs and the Present Value “Puzzle” of Farmland Prices," Southern Economic Journal, John Wiley & Sons, vol. 68(3), pages 549-565, January.
    8. Gabriel Power & Calum Turvey, 2010. "US rural land value bubbles," Applied Economics Letters, Taylor & Francis Journals, vol. 17(7), pages 649-656.
    9. Weerahewa, Jeevika & Meilke, Karl D. & Vyn, Richard J. & Haq, Zahoor Ul, 2008. "The Determinants of Farmland Values in Canada," Working Papers 43461, Canadian Agricultural Trade Policy Research Network.
    10. Onel, Gulcan, 2009. "Modeling Nonlinearities in Farmland Values: A Dynamic Panel Threshold Error-Correction Model," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49445, Agricultural and Applied Economics Association.
    11. Carlberg, Jared G., 2002. "Effects Of Ownership Restrictions On Farmland Values In Saskatchewan," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 34(2), pages 1-10, August.
    12. Li, Xin, 2016. "The Farmland Valuation Revisited," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 4(2), pages 1-14, April.
    13. Mykel R. Taylor & Gary W. Brester, 2005. "Noncash Income Transfers and Agricultural Land Values," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(4), pages 526-541.
    14. Xu, Jin & Leatham, David J., 2010. "Dynamic Analysis of Land Prices with Flexible Risk Aversion Coefficients," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61872, Agricultural and Applied Economics Association.
    15. Pinto, Allan & Griffin, Terry W., 2022. "Detecting bubbles via single time-series variable: applying spatial specification tests to farmland values," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322534, Agricultural and Applied Economics Association.
    16. Pavel Ciaian & d’Artis Kancs & Johan Swinnen, 2010. "EU Land Markets and the Common Agricultural Policy," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 53(3), pages 1-31.
    17. 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.
    18. Turvey, Calum G. & Ellinger, Paul N., 2002. "A Comparative Study of the Financial Performance of Grain and Oilseed Farms in Ontario and Illinois," 2002 Regional Committee NC-221, October 7-8, 2002, Denver, Colorado 132376, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    19. 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.
    20. Thibodeau, David R. & Clark, J. Stephen, 2009. "Government support, transfer efficiency, and moral hazard within heterogeneous regions in Canadian Agriculture," 2009 Conference, August 16-22, 2009, Beijing, China 51806, International Association of Agricultural Economists.

    More about this item

    Keywords

    Land Economics/Use;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aesc12:134954. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aesukea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.