The distribution of the rent–price relationship of agricultural land in Germany

Abstract

Abstract This paper studies the profitability of investments in agricultural land, using the rent–price ratio (RPR) as a profitability measure. In order to allow for district-level heterogeneity, the full conditional distribution of the RPR is modelled using a generalised additive model for location, shape and scale. The analysis is based on data from Lower Saxony, Germany. The profitability of investments in land varies between and within districts. The variation can be explained by differences in the farming structure, the production programme and economic indicators. Further, differences in the distribution of the RPR between arable land and grassland are found.