Institutional drivers of land mobility

Abstract

Purpose The purpose of this paper is to examine the role of institutional factors in agricultural structural change in the European Union (EU) using the case study of land mobility in Ireland. A range of agricultural land use options are compared in order to examine the effect of domestic and EU policy instruments on land mobility. Design/methodology/approach Using socio-economic data from the Teagasc National Farm Survey, three hypothetical farms are created using a microsimulation approach to compare incomes across farm systems and land use options. Tax and subsidy policies are applied to derive returns for the hypothetical farms under a variety of land use scenarios. Findings The analysis finds that in comparing four hypothetical scenarios, leasing out agricultural land on a long-term basis can prove more profitable for cattle and tillage farmers than farming the land. Only dairy farmers derive consistently higher disposable incomes from farming their land as opposed to leasing it out. Changes in CAP rules can also negatively affect farmers taking advantage of Ireland’s tax-based leasing incentives. Originality/value A gap in the literature exists in terms of how institutional factors may act to prevent either land supply or demand channels from functioning properly. This paper addresses that gap, using Ireland as a case study.

Understanding agricultural land leasing in Ireland: a transaction cost approach

“…Some of these parcels may previously have been rented on an informal basis with just one year duration i.e. under the conacre system (Patton and McErlean 2003 ; Geoghegan et al 2017 ). The amount of agricultural land in medium- or long-term leases increased strongly from 2014 onwards and from quite a low base.…”

“…Negotiations in relation to the Common Agricultural Policy have involved some degree of uncertainty and it is likely that this uncertainty increased in 2018 and 2019 as the 2014–2020 CAP programme reached the initially planned end date. Indeed, the link between the use of the land and the EU subsidy payments, introduced by the midterm review of CAP, and the re-negotiation of 2013, in which farmers who had leased out all of their land were not considered to be “active” farmers, may induce landowners and tenants to be cautious in making decisions that could put their future subsidies at risk (Geoghegan et al 2017 ). Therefore, the planned CAP reform and related information that landowners and tenants may retrieve from the regulatory proposals may affect decisions on contract duration.…”

“…The legal status of potential tenants could play some role in influencing the demand for agricultural land leases, in terms of both price and duration. In addition, the expansion of tax incentives is motivating landowners into supplying more land to potential tenants (Geoghegan et al 2017 ). There is official evidence of an increase in uptake of tax incentives in relation to the leasing of agricultural land (Revenue 2021).…”

Exploring state pension provision policy for the farming community

“…We design hypothetical case farms around farmers with no private pension and consider their entitlement to either or both the State Contributory and Non-Contributory old age pension. Hypothetical cases are a common methodological approach adopted in agricultural research to explore the effect of policy developments on farmers (Le Gal et al, 2011;O'Donoghue, 2014;Geoghegan et al, 2017: Leonard et al 2017aUtomo et al, 2018;Birge and Herzon, 2019). There are a number of benefits to this methodological approach.…”