EVALUATING LAND PRICES UNDER ENVIRONMENTAL REGULATION

Jakob Vesterlund Olsen1, Toke Emil Panduro1, Cathrine Ulla Jensen1, Jesper S. Schou1, Jens-Martin Roikjer Bramsen1, Marie Lautrup1, and Michael Friis Pedersen1

1Department of Food and Resource Economics, University of Copenhagen

*Corresponding author, jvo@ifro.ku.dk

 

ABSTRACT

In this paper we present a novel application of the difference-in-difference method to analyse the effect of regulation on agricultural land prices in the case of implementation of mandatory riparian buffer zones. The buffer zones are adjacent to streams and lakes and are designated as part of the Danish implantation of the EU Water Framework Directive. The buffer zone regulation existed from 2012 to 2015 when the regulation was suspended. Using a hedonic price model we do a difference-and-difference estimation of the development in regional farm land prices for farms with land subject to the buffer zone regulation compared to farms not subject to buffer zones. A number of model specifications are tested but no significant effect on land prices of the buffer zone regulation is identified. This is explained by the fact, that the regulation was based on a subsidy scheme offering flat rate compensation to farmers obliged to establish buffer zones. Thus, results suggest that due to the subsidies, farmers’ expectations for the future economic rent are unchanged and, thus, no significant effects on the land prices are identified.


BIOGRAPHY

The primary research fields for Jakob Vesterlund Olsen are productivity analyses and policy evaluation of initiatives targeted farm level. Recent research activities has evolved around the financial effect of land fragmentation and land prices. Jakob has previously been employed by Danish Knowledge Centre for Agriculture which is now known as SEGES. His educational background covers education and practice as farmer with focus on pig and crop production followed by an education in agricultural economics and finally a PhD in agricultural economics.

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