Factors Influencing Farm-Land Value in the Czech Republic

Abstract

Czech farm-land had enjoyed considerable growth in value from 2008 to 2019. This paper identifies the main determinants of agricultural land prices variations and how these variations are influenced by urbanization, lease payments, and subsidies. These three factors were thoroughly examined for the existence of a unit root using the Augmented Dickey Fuller Test. The long-run relationship between farm-land value and these elements was estimated using the co-integration approach, specifically the Johansen procedure. The estimation confirms the existence of this long-run relationship. Short-run fluctuation in agricultural land prices is explained using the Error Correction Model. As the most important variable in the short-run performance of Czech agricultural land prices, the authors identified the influence of urbanization. This information could be used to help regulators avoid potential agricultural land value instabilities and volatility in the market and hence would contribute to sustainable land use.