Farmland Tenure and Transaction Costs

This article explores to what extent farming preservation or development initiatives from public authorities and/or Non-Governmental Organizations (NGOs) resting upon Long-term and Full Rights Acquisitions (LFRA) of land succeed in preserving farmland. The line adopted is to assess whether this mode of access to land use decreases farm profitability. With this aim, we compare ex ante transaction costs and some other costs and benefits incurred by farmers with access to land use, in the case of LFRAs, with the corresponding costs and benefits associated with the two other major coordination mechanisms, namely, conventional lease arrangements and purchasing transactions. The comparison rests on original data on costs obtained in a survey of farmers within a French region. We find that these farmers incur fewer ex ante exchange costs than by purchasing land and higher ex ante exchange costs than by leasing to an individual owner relative to the total cost of accessing land use. This difference is due to negotiation costs, which are nearly twice as high as in conventional lease arrangements. Our results imply that LFRAs would improve their efficiency by limiting the period and the intensity of tenant involvement in their own implementation without reducing their understanding of tenants' expectations.