Impacts Of Agricultural Policy Reform On Land Prices: A Quantitative Analysis Of The Literature

Agricultural policy support to farmers is being reconsidered in most industrialized countries. The adverse incentive structure of price support is generally considered to be inadequate. Income support schemes may therefore be preferable in view of externalities of agricultural production such as the development and maintenance of nature. A plethora of studies comprises estimates of the impact of a sustained future benefit stream (among other things through continued price and income support) on land prices. The empirical results of these studies vary considerably. We apply meta-analytical methods to identify the factors explaining this variation in capitalization of future benefits in agricultural land prices. The resultant information is of crucial importance given the current change from price support to income support in agricultural policymaking. The results of the meta-analysis show that there is considerable variation due to the way in which income is taken into account, and the way in which expectations of future benefits are operationalized. There is also evidence that a change from a mixed price and income support scheme to a system of income support will result in substantially lower capitalization in land values.