Institutional drivers of land mobility: The impact of CAP rules and tax policy on land mobility incentives in Ireland

Abstract

Purpose

The purpose of this paper is to examine the role of institutional factors in agricultural structural change in the European Union (EU) using the case study of land mobility in Ireland. A range of agricultural land use options are compared in order to examine the effect of domestic and EU policy instruments on land mobility.

Design/methodology/approach

Using socio-economic data from the Teagasc National Farm Survey, three hypothetical farms are created using a microsimulation approach to compare incomes across farm systems and land use options. Tax and subsidy policies are applied to derive returns for the hypothetical farms under a variety of land use scenarios.

Findings

The analysis finds that in comparing four hypothetical scenarios, leasing out agricultural land on a long-term basis can prove more profitable for cattle and tillage farmers than farming the land. Only dairy farmers derive consistently higher disposable incomes from farming their land as opposed to leasing it out. Changes in CAP rules can also negatively affect farmers taking advantage of Ireland’s tax-based leasing incentives.

Originality/value

A gap in the literature exists in terms of how institutional factors may act to prevent either land supply or demand channels from functioning properly. This paper addresses that gap, using Ireland as a case study.

Citation

Geoghegan, C., Kinsella, A. and O’Donoghue, C. (2017), "Institutional drivers of land mobility: The impact of CAP rules and tax policy on land mobility incentives in Ireland", Agricultural Finance Review, Vol. 77 No. 3, pp. 376-392. https://doi.org/10.1108/AFR-12-2015-0056