Agricultural Support, Farm Land Values and Sectoral Adjustment

The Implications for Policy Reform

image of Agricultural Support, Farm Land Values and Sectoral Adjustment

Governments intervene in the agricultural sector through policies that both support and shape agricultural production. This leads to two important outcomes. First, agriculture specific programmes intended to increase the welfare of farmers can become capitalised into asset values. Second, many policies, in particular regulatory ones, reduce asset mobility, resulting in reduced economic efficiency due a sub-optimal allocation of resources. This study focuses on the capitalisation of government support into land rents and prices. It assesses the consequences of inflated asset values, and suggests lessons for future policy making.

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A Framework to Analyse Policies that Affect Asset Capitalisation and Mobility

Asset capitalisation and asset mobility are two dimensions that are important for policy reform. The discussion thus far has concentrated on government policies directly provided as price support or subsidies to agriculture. This chapter broadens the discussion to include other policies and puts them in a general guiding framework. The framework encompasses agricultural policies as well as other policies such as taxation, rules and regulations. This is followed by a qualitative assessment of how other policies might impact asset mobility in agriculture, using information gleaned from various government information sources and five commissioned country case studies for France, Japan, Korea, Mexico and Norway. 


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