Section 67
Chapter 66,311

Is there a term structure in land lease rates?

Huettel, S.; Ritter, M.; Esaulov, V.; Odening, M.

European Review of Agricultural Economics 43(1): 165-187


ISSN/ISBN: 0165-1587
DOI: 10.1093/erae/jbv010
Accession: 066310650

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This article applies the concept of a term structure to agricultural land rental prices. Based on theoretical considerations, we develop a hedonic pricing model that allows for different shapes of the term structure curve while controlling for other price-relevant characteristics. We apply this model to land lease contracts in Saxony-Anhalt. We find an upward-sloping term structure during the agricultural price boom in 2007 and 2008, where market participants expected increasing rental prices. For the subsequent years, however, we detect a single-humped term structure. Hence, market participants revised their expectations and assumed a decline of land rental prices in the long term.

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