Humboldt-Universität zu Berlin - Resource Economics

Dissertation of Annette Hurrelmann

Agricultural Land Markets Organisation, Institutions, Costs and Contracts in Poland

Start: 2001
End: 2005

The way in which agricultural land markets operate differs fundamentally from what is suggested by neoclassical economic thought. Instead of functioning frictionlessly and coming into existence automatically, land markets are characterised by substantial transaction costs and need to be consciously designed, maintained and protected. The objective of this book by Annette Hurrelmann is to contribute to a better understanding of the real nature of rural land markets. It does so by incorporating ideas from New Institutional Economics, including Transaction Cost Economics and the Economics of Property Rights, as well as New Economic Sociology into the analysis of land market contracting and organisation. A comprehensive market model is constructed, explaining the land contracting decisions of farmers and landowners as the result of the influence of the formal and informal institutional environment, the organisation and social embeddedness of exchange, the properties of the transaction and the characteristics of the resource land. The model allows to tackle a number of previously “underresearched” questions concerning the functioning of land markets. Among the aspects that are discussed in detail are: What are the internal rules of the organisation “land market” and why are they established in this way? On what basis do farmers and landowners make the choice between sale and rent of land? How do institutions and properties of the transaction jointly influence land rental contract design? Empirical data from a survey and three case studies in Poland is used to show that land markets can be regarded as organisations, governed by relational contracts between actors. Internal market rules are in place that serve to lower transaction costs for members of the organisation “land market”, protect the village community and create an entry barrier into the market for outsiders. Furthermore, the additional functions of land apart from being a factor of production (for example as insurance and means for speculation) are found to be of crucial influence in the choice between sale and rent of land. They are responsible for the fact that most of the interviewed farmers express a preference for purchase instead of rental, while landowners tend to be very reluctant to give up their land permanently through sale. The results also stress the need for land market research to pay close attention to the institutional environment of transactions, i.e. the legal setting as well as customary rules, because this is observed to have a strong effect on the design of land contracts.

Researcher: Hurrelmann, Annette

Advisor: Prof. Dr. Dr. h.c. Konrad Hagedorn