Integrating the Rent Gap into the Ground Rent Theory. Measurement and Implications for Different Models of Agriculture

The aim of this paper is to integrate the development of the rent gap theory into the ground rent theory, proving that in the neoclassical approach there is no place for the occurrence of the rent gap. A classification of potential farmers’ reactions to the rent gap within different farming conditions is made. From an empirical perspective, an attempt is made to determine the level and dynamics of the rent gap in agriculture in Poland, in the regional cross-section. The authors use the income approach and the Capital Asset Pricing Model (CAPM) for estimating the capitalisation rate. It has been found that the rent gap is a permanent phenomenon in Polish agriculture, the dynamics of which largely depends on macroeconomic factors. Three scenarios of farmers’ response to the rent gap are identified in the paper. Measuring the rent gap can be a step towards determining the quasi-market value of environmental amenities of land.

Accepted Manustcript. Funding: National Science Centre (NCN) of Poland under Grant No. UMO-2022/45/B/HS4/00188

Narodowe Centrum Nauki