In Serbia it is prescribed by The Law on Agricultural Land that foreign legal or natural persons could not become owners of agricultural land. The aim of this paper is to show that such a norm creates an economic environment where an optimal allocation of agricultural land as a production factor could not be achieved. The cost - benefit analysis shows that main gainers are Serbian producers and buyers of land who are able to realize a monopoly profit, whereas sellers of agricultural land are at loss, getting a lower economic rent, as well as foreign buyers. A total loss of domestic sellers only is bigger than a total profit of buyers. In the end, it is being pointed to a relativity of the ban, in the sense of a possibility to easily get past the ban through provisions of The Law on Foreign Trade. The conclusion points out that an eventual suspension of the ban would stimulate efficiency of Serbian economy and an increase in the net welfare.


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