A geoadditive distributional regression analysis of the local relationship of land prices and land rents in Germany

The analysis of sales prices and rents for agricultural land are a classical research topic in agricultural economics. Due to increased dynamic on agricultural land markets, their relationship has gained increased interest recently. The present study contributes to the literature by studying the district level heterogeneity of the rent-price-ratio (RPR) of agricultural land. This was achieved by modelling the full conditional distribution of the RPR, using a generalised additive model for location, shape and scale (GAMLSS). In order to choose an adequate model specification; a variable selection procedure is applied. The analysis utilised data from the German federal state Lower Saxony, containing all observable sales and rent price data. Shares of different field crops, livestock densities, shares of different farm types, and the concentration of land were found to influence the distribution of the RPR. Furthermore, differences in the distribution between arable land and grassland were found. By explicitly modelling and visually presenting spatial effects, additional insights into the spatial variation of the profitability of investments in farmland in Germany are provided. Thereby, conclusions regarding efficiency of land markets are possible.