Investigating Market Scepticism Regarding Agricultural Land Markets

• Applicant: Professor Dr. Alfons Balmann, since 9/2022
• Subject Area: Agricultural Economics, Agricultural Policy, Agricultural Sociology
• Term: since 2020
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 317374551

It is the overarching aim of the FORLand project to scientifically evaluate land market regulations. Whereas various other subprojects analyse the economic consequences of different regulatory outcomes, SP3 focuses on the conditions under which regulations come about and which obstacles there are. In many countries, including Germany, the agricultural economy in general, and land markets specifically, have always been regulated. Some farmers, however, argue that the current regulation does not protect them enough from competition by new actors on the land market. Generally, strong regulation change incentive structures of that market. Suppliers react to these incentives and adjust their businesses accordingly to maximise their profits, which creates path dependencies. Therefore, market interventions have long term effects such as being costly to the population and their market-distorting properties may make it even harder for farmers to do business in an independent and economically sustainable way. Yet, due to endowment effects and path dependencies, these policies are especially hard to be reduced. In SP3 we investigate resentments which hamper the process of establishing better regulations and test ways to mitigate these resentments. Thus, the three main objectives of this subproject are to investigate the drivers of land market scepticism (1); to develop a conceptual perspective on discourse failures for land market policies (2); and to test institutional settings to mitigate the drivers of market scepticism in the laboratory (3). Resentment of the market mechanism can be driven by a) the fear that it will play out to one’s own disadvantage, hence the basic driver is rent-seeking and b) reasons for resenting the market mechanism are beyond personal gain, such as a fundamental unease towards the market system, which are labelled as ideological reasons. To address our 1st research objective we want to experimentally investigate which role these two drivers play. Therefore, we will conduct two experiments to elicit farmers’ attitudes towards land market participants (e.g. investors) and to identify which role rent-seeking and anti-market ideology play. For the 2nd research objective we will use on the ordonomic approach to business ethics to explain the origins of discourse failure in land market issues and develop three approaches for overcoming the problem of rent-seeking and anti-market attitude. To address the 3rd research objective, we will test ways to mitigate land market scepticism. We test whether ideological resentment can be reduced by stimulating cognitive empathy for the opposing position thus re-enabling discourse. Rent-seeking based resentment need to be addressed at the rule-level to change incentives, which we will explore in an experiment where land market stakeholders negotiate regulations. SP3’s contribution is a better understanding of land market resentments and to suggest institutional ways to mitigate this scepticism.

• DFG Programme: Research Units
• Subproject of: FOR 2569: Agricultural Land Markets - Efficiency and Regulation
• Ehemalige Antragstellerin: Dr. Johanna Jauernig, until 8/2022