Farmland Abandonment and the Farmland Market: Lessons from Japan

Résumé du document

A major concern in Japan is the farmland market which is inefficient and which is reaching a state of illiquidity. If one could go by a hypothesis the reason for this inefficiency could be related to the remarkable increase in area of abandoned farmland. In this paper, a model which is commonly known as the ?Cointegration procedure' is implemented to examine the relationship between farmland abandonment and farmland market efficiency. To increase the intensity and depth in this study, two periods are identified which is:
a. Pre-1980, when the farm rents were controlled; and
b. Post-1980, when the rent control policy was abolished. In other words, the commencement of farmland jeopardy.
Results indicate that an improved market efficiency in the farmland of Japan in the latter period (i.e. post -1980) has contributed to the increase of abandoned farmland. It is also a likely estimate that deterioration in the agricultural profitability which was instituted by the reduction of price support coupled with the problems of an ageing agricultural population, have resulted in making it a Herculean task for small-scale farmers who are inefficient in their ability to retain their land. Thus, one can conclude that deviation towards freer markets, for both farmland and agricultural products has triggered out an increase in farmland abandonment in Japan.

Extraits

[...] Econometric Methods. New York, The McGraw-Hill International. Kao, C. (1999). "Spurious Regression and Residual-Based Tests for Cointegration in Panel Data." Journal of Econometrics 90: 1-44. Karlsson, S. and M. Lothgren (2000). "On the Power and Interpretation of Panel Unit Root Tests." Economics Letters 66: 249-255. Kashiwagi, M. (1994). [...]

[...] Thus, this result supports the view that farmland abandonment occurs particularly in areas where the farmland market is inefficient, because farmers, who in the former period could retain land expecting higher prices, lost motivation to maintain their lands when the general economy and agriculture suffered deterioration. This result goes some way to explain the recent marked increase of farmland abandonment in urban faming areas, where farmland prices still tend to contain rational bubbles, compared to other farming areas. Of course, it is also likely that the serious deterioration of agricultural profitability and the increase of ageing in the agricultural population have escalated the number of agricultural households willing to relinquish their lands. [...]

[...] Those lands may be abandoned when there is little demand for them. Table 6 Farmland abandonment model for two periods Note: Numbers in parentheses are t statistics; * and show significance at and respectively Summary and Conclusions A farmland abandonment model has been used to examine the influence of the change in the farmland market on the recent increase of abandoned farmland in Japan. The model is specified in relation to farmland market efficiency, the change in agricultural profitability and ageing of the agricultural population. [...]

[...] A farmland abandonment model is specified to include a variable which represents farmland market efficiency. The model is then tested using panel data from 1975 to Farmland Abandonment Farmland abandonment occurs when agricultural profitability reaches a minimum threshold and farmers cannot find alternative productive uses for their land. In Japan today, farms can be divided roughly into two types: high cost / low productivity farms; and low cost / high profitability farms. These are denoted here as type A and type B farms, respectively. [...]

[...] The price of farmland is determined by farm rent, theoretically defined when the market is efficient, i.e. P = αR. Since the area of owned land is limited, the supply curves are perfectly inelastic in the rental market at QA and QB in the short-run. The demand curve is downward sloping from RB for farm B. Conversely, in the sales market, the type A farm has an inelastic supply curve assuming that farmers, when selling, would rather sell all of their land rather than a part of it. [...]