Abstract
This article investigates the recent changes of agricultural land prices in Lithuania and quantitively assesses the most important factors affecting it. Land is one of the main scarce resources and it distinguishes itself among others by the inelasticity of price change to quantity, meaning that the changes in land prices are affected by demand and in very limited extend by supply. Taking this into account, it is important – from the practical as well as the theoretical points of view – to know these factors and, if needed, take regulatory measures. As the case of Lithuania suggests, the recent rapid growth of land prices is mainly driven by general economic performance (GDP), EU and national financial support provided to the Lithuanian agriculture sector and the regulation of agriculture food prices (the setting of purchase prices).
Highlights
Agriculture land prices experienced a rapid increase in Lithuania after the economic downturn, exceeding the number of other assets’ classes price performance
Theoretical and practical investigation suggests that fundamental factors of agriculture land price movements are not always capable of providing comprehensive explanations
Land, as a scarce resource, distinguishes itself among the other resources by supply inelasticity to price changes, meaning that basically only the demand-side factors make any impact on land prices
Summary
Agriculture land prices experienced a rapid increase in Lithuania after the economic downturn, exceeding the number of other assets’ classes price performance This raises practical and theoretical questions of whether such movements are sustainable; are they driven by fundamental factors in agriculture activities? The experience of researchers in this field suggest that both could be expected: direct as well as indirect factors that affect the agriculture land prices. This question in Lithuania is not yet fully covered; the main aim of this paper is to quantitively assess agricultural land price developments in Lithuania over the last two decades. The authors are thankful to their colleagues Milda Šeškutė and Dmitrij Celov for their valuable comments and suggestions provided during the preparation of this article
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