Publicerad artikel

Passive farming and land development: A real options approach. Land Use Policy 80, p. 32-46.


Författare: Luca Di Corato  Mark Brady 


The EU's farmers are no longer required to produce commodities to receive direct payments as long as they keep their land in good condition. Some believe this is bad for development because it encourages passive farming. We evaluate, using a real options approach, the implications of decoupled payments for the desirability and optimal timing of agricultural land development when considering sunk investment costs and uncertain future returns.

We find that decoupled payments accelerate development while passive farming increases, by adding managerial flexibility, the value associated with land. We then use the Nash bargaining solution to identify the rental share to be paid for leasing land. We show that a deal for the lease of land can always be reached, but that the facility to use passive farming as an outside option allows landowners to extract policy rents, thereby undermining the potential for the Basic Payment Scheme to support tenant farmers’ incomes.


Liknande publikationer


2022-05-17
AgriFood Fokus 2022:3
Ägg och matfågel – vilka är utmaningarna och hur resilient är produktionen?
2022-04-27
AgriFood Fokus 2022:2
Nitrifikationshämmare - ett sätt att minska förlusten av kväve från jordbruksmarken?
2022-03-18
AgriFood Rapport 2022:3
Goda råd för att minska klimat- och luftpåverkan - hur fungerar informationsinsatser riktade till jordbruket?

Författare:

Luca Di Corato


Mark Brady