Should I farm or should I not?

In this paper we use stochastic dynamic programming for modelling the investment decision of a landowner contemplating the conversion of idle land to farmland. The landowner may, by investing, develop land for active farming counting, whenever farming is not protable, on the support secured by the CAP for land kept in good agricultural and environmental condition, i.e. land "passively" farmed. We determine, under the current CAP frame, the optimal capital intensity and the optimal investment timing and show that, if compared to a scenario where no support is provided, land development occurs earlier in expected terms and the associated capital intensity is lower. Our results contradict arguments against the support paid to farmers that passively manage their land and show that the current policy frame allows maintaining land in good state at limited cost in terms of excess capacity.

Issue Date:
Aug 28 2017
Publication Type:
Conference Paper/ Presentation
Total Pages:

 Record created 2017-08-02, last modified 2017-08-29

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