EMPIRICAL-ANALYSIS OF MARKETS FOR LEASED AGRICULTURAL LAND IN MECKLENBURG-POMERANIA

This paper discusses the question how market transparency on local mar kets for leased agricultural land in the 'New Bundeslander (NBL)'', i. e. the Eastern States which joined the Federal Republic of Germany af ter reunification, can be increased. Although this question is relevan t for all market participants, it is particularly important for nation alized land in Eastern Germany (ca. 25 p. c.) which is to be leased on a long-term basis by the privatisation agency, the ''Bodenverwertungs -und -verwaltungsgesellschaft (BVVG)''. Long-term contracts with tenan ts require better information on the present situation and prospective development of local land markets than short-term contracts. At the b eginning of our analysis we describe how markets for leased land came into being and developed in the period after reunification. The main c onclusion is that markets for leased land near the former border betwe en the two German states as well as for land with favourable location were faster and more comprehensively established than this happened in other areas. As an empirical exemplification an analysis of the marke t for leased agricultural land in ''Mecklenburg-Vorpommem'' (the North -Eastern Bundesland which is located at the Baltic Sea) is presented, based on data from 13,400 lease contracts. However, no time-series ana lysis but only a cross-section analysis was possible for 1991 and 1992 ; i. e. quantitative investigation of changes over time are still to b e done by future studies. The results based on tables and regressions show that natural productivity of the leased land proves to be the mai n determinant of the level of rents. In regression analyses, 40-60 p. c. of the variation is explained by this variable. In addition, agreem ent on long-term contracts (instead of short-term contracts) and deman d from the Western Bundeslander lead to an increase in land rents. Fur thermore, public corporations -i.e. mainly the BVVG - settle with cons iderably lower rents than natural persons, not only in the case of lon g-term contracts, but also when short-term contracts are concerned. No t surprisingly, BVVG shows less flexibility than natural persons with regard to determination and differentiation of rents on the local mark ets for leased land included in our analysis. The results which were a chieved on the basis of the collected data mentioned above do not only reflect the effects of market mechanism on regional land markets. The are also strongly influenced by particularities of the transformation period, above all by the restructuring process and the bureaucratic p rocedures applied by the BVVG. The proposed method to determine and al so to adjust rents facilitates the administrative work of the BVVG whi ch has to search for adequate, i. e. market-oriented, rent levels. The same is true for those buyers of nationalized land who purchase this land from the BVVG and lease it to farm operators. The recommended sol ution lies in the interest of both the lessors and the lessees, and ma rket transparency is increased in favour of all market participants.