The tenant's pre-emption rights in Italian agriculture: An introductory economic evaluation

Abstract

The paper explores the almost “unknown territory” of the economic evaluation of pre-emption rights (PRs) in agriculture, by focusing on two PRs held by tenant farmers in Italy: on purchasing of rented land and on contract renewal. For both PRs, the main characteristics and an historical framework are provided. The research has three goals: PR values estimations, exploring factors that affect the tenant's choice of rating the PRs, exploring factors that affect the PR values. Lacking a specific theory on the PR value in agriculture, an ad hoc conceptual framework has been developed by referring mainly to the theory of farm evaluation, which has proved helpful in discussing the research findings. Research goals are achieved by employing the contingent valuation, logistic regression and linear regression methods. Data collection refer to an on-farm survey covering 55 tenants, which has provided a database of 230 lease contracts.Among the analysis findings, the worthiest of note are: a) the farmer's PR on the neighbouring land for sale is more appreciated than the tenant's PR on rented land for sale; b) tenant's PRs favour the growth of farm size not only by securing plots with labour intensive crops but also by guaranteeing adequate economies of scale; c) the percentage of contract area on total rented area is the main factor that induces tenants to evaluate the PR of a specific land under contract; d) the value of the PR on the purchasing of rented land mostly increases in relation to the dimension of the farm machinery fleet, the presence of intensive crops and the tenant's interest in the rented land, while investments made on it positively affect the value of the PR on contract renewal.