| It is suggested to perform a study aimed at the actualisation of the price elasticity s of supply and demand of agricultural land. This with the intention to measure the land market effects of fiscal policies, both general and specific for the agricultural sector A LEI-report describing the method and findings of a study aimed at the actualisation of the price elasticity s of the supply of and the demand for agricultural land. The study starts with an overview of the literature which shows that studies concerning supply and demand elasticity s of agricultural land were only performed in de sixties and seventies and not in recent years. The report argues that there is an important theoretical question involved as agricultural land markets differ greatly from the textbook-case of perfect competition. This is due to specific characteristics of land and the land market itself. Land is heterogeneous and cannot be relocated. In a situation where economies of scale dominate the trade of agricultural land this means there are only a few buyers and sellers on the agricultural land market, mostly neighboring farmers, leading to bargaining and market power effects. These facts results in specific theoretical assumptions concerning the supply and demand elasticity s for agricultural land. And after gathering the relevant empirical information these assumptions are tested using a proper estimation procedure. |
