Economics and Management

Research Title: 

Farmland and related agricultural inputs: dynamics, interactions and tools for economic sustainability of farms 

Tutor: Prof. Anna Gaviglio

 

Contact details

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Health, Animal Science and Food Safety – VESPA

Via Giovanni Celoria 2 – 20133 Milano Italy

 

State of the art

Land is one of the most important inputs for agricultural and livestock production, and often represents the main farm asset that defines the scale dimension of agricultural enterprises. The competition for land by both agricultural and non-agricultural uses makes its value to increase consistently, far beyond those associated to the sole farm uses; it is consequently difficult to establish a clear relationship between soil productivity and market value of land. The valorisation of land for non-agricultural purposes, combined with the attribute of security of this good which is essentially unlimited, turns the land capital into a safe haven asset. This explains the reluctance of owners to sell their land, reducing its supply and, consequently, increasing its market value. Furthermore, there is also a strong competition for this asset within the agricultural sector, for alternative uses, such as the production of food and bioenergy as well as feed production and the spreading of manure in areas with high livestock density. The value of land for agricultural purposes boosts also as a consequence of the growing demand from farms, aimed at increasing their size to enjoy economies of scales. Moreover credit market imperfections and transaction costs may affect significantly farms’ availability of financial resources to buy land. Firstly, where the capital markets are imperfect, the purchase of land is usually funded through farms' own resources. Secondly, with lack of alternative investment options, land may be purchased (by non-agricultural subjects) as a protection against inflation or as a secure asset. Thirdly, when farm access to credit is constrained, much of the capital is absorbed by land purchases, preventing any alternative investments in new technologies, machineries and other farm inputs.

 

Aims of the project

In this context, land rent became one of the most direct, simple and economically viable solution in order to reach an optimal farm size. It is therefore an important tool in modern agricultural systems. Over the past decades land market has been affected by various drivers such as the rising average age of landowners, the Common Agricultural Policy, new rural development policy measures, the incentives for renewable energies, contract farming, price volatility of agricultural commodities, the cost of other farm inputs. In particular land market is deeply connected and influenced by the dynamics of the other farm inputs, such as agricultural labour and capital. Any analysis of land market should then take into account the endowment in farm labour and capital The goal of the study is to develop a methodology able to explain the main determinants affecting land value and related rental prices, also in connection with the allocation and use of the other farm inputs.

To carry out such analysis in an efficient and reliable way some elements are necessary:

- a knowledge framework of the land market and other farm inputs;

- a theoretical frameworks able to represent dynamics and interactions of land and other farm inputs markets;

- a consequent empirical application that requires gathering of real data and their analysis;

- the application of quantitative analysis based on real data, using multivariate inferential analysis; such methods should explicitly consider the spatial interactions among farms and their use of production factors.

 

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Recent publications of the tutor in the field

1. Gaviglio A., Demartini E., Mauracher C., Pirani A. (2014), “Consumer perception of different species and presentation forms of fish: an empirical analysis in Italy”, Food Quality and Preference, 36, pp. 33-49.

2. Demartini E., Gaviglio A, Bertoni D. (2015), “Integrating agricultural sustainability into policy planning: A geo-referenced framework based on Rough Set theory”, Environmental Science & Policy, 54, pp. 226-239.

3. Gaviglio A., Bertocchi M., Marescotti M. E., Demartini E., Pirani A. (2016). The social pillar of sustainability: a quantitative approach at the farm level, Agricultural and Food Economics, 4, 15.

4. Demartini E., Gaviglio A., Gelati M. and Cavicchioli D. (2016). The Effect of Biogas Production on Farmland Rental Prices: Empirical Evidences from Northern Italy, Energies, 9(11), 965, pp.1-23.

5. Pirani A., Gaviglio A., Demartini E., Gelati M., Cavicchioli D. (2016). Studio delle determinanti del valore degli affitti agrari. Potenzialità dell’uso di microdati e applicazione del metodo dei prezzi edonici, Aestimum, 69, pp. 131-151.