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We used Ricardian framework with heterogeneous land quality to analyse how policies used to support farm incomes, reduce negative agri-environmental externalities and enhance the provision of positive externalities influence land allocation decisions and land prices. Four agri-environmental policy instruments are considered: a uniform area payment, a quality-dependent area payment, a mandatory buffer strip policy and a voluntary buffer strip payment. We also analyse how general tax and monetary policies may affect agricultural land prices. The theoretical framework is illustrated by an application to Finnish agriculture.


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