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Land price diffusion across borders: The case of Germany
Humboldt-Universität zu Berlin, Faculty of Life Sciences, Department of Agricultural Economics, Berlin.
Humboldt-Universität zu Berlin, Faculty of Life Sciences, Department of Agricultural Economics, Berlin.
Humboldt-Universität zu Berlin, Faculty of Life Sciences, Department of Agricultural Economics, Berlin.ORCID iD: 0000-0003-2543-3673
2018 (English)Report (Other academic)
Abstract [en]

Land market regulations are often justified by the assumption that activities of foreign and non-agricultural investors drive up land prices in countries with low land price levels. However, empirical knowledge about the dynamics of agricultural land prices across borders is sparse. Using theGerman reunification as a natural experiment, we study the effect of the former inner German border on the dynamics of agricultural land prices in East and West Germany. We apply a land price diffusion model with an error correction specification that estimates to what extent agricultural land markets are spatially integrated. A novel feature of our model is its ability to distinguish price diffusion within states and across state borders. We find that local agricultural land markets in Germany are linked by a long-run equilibrium relationship. Spatial market integration, however, does not hold among all counties in our study area. Regarding our main research question, we provide evidence for a persistent border effect given that the fraction of spatially integrated counties is larger within states than across the former border. Moreover, we observe non-significant error correction terms for many counties along the former border. From a policy perspective, it is striking to realize that even 25 years after German reunification, pronounced land price differences persist. It is quite likely that price diffusion through existing borders within the EU would take even more time given language barriers, different administrative procedures for land acquisitions, different tax systems, and information asymmetries between domestic and foreign market participants.

Place, publisher, year, edition, pages
Berlin: DFG Research Unit 2569 FORLand, Humboldt-Universität zu Berlin , 2018. , p. 25
Series
FORLand-Working Paper ; 03
Keywords [en]
Agricultural land markets; price diffusion; spatial dependence; border effect
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-55181DOI: 10.18452/19263OAI: oai:DiVA.org:hj-55181DiVA, id: diva2:1614903
Available from: 2021-11-28 Created: 2021-11-28 Last updated: 2021-11-28Bibliographically approved

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Ritter, Matthias

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CiteExportLink to record
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Citation style
  • apa
  • ieee
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  • de-DE
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  • en-US
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