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Market Failure and Japanese Farmland Rents

Lookup NU author(s): Dr Philip Dawson

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Abstract

Since the early 1950s, Japanese farmland rents have been regulated and a consensus emerged that rent control led to market failure. Hypothesising a rent-formation model where rents are determined by prices, this paper estimates a threshold autoregressive model which integrates three tests of market failure, namely, inefficiency, bias and asymmetry. There are four results. First, a long-run relationship exists between rents and prices, and the Japanese farmland rental market is efficient. Second, the rent-price elasticity is unity and the market is unbiased. Third, rents are Granger-caused by prices which supports the rent-formation model. Fourth, asymmetry exists where more rapid error-correction occurs immediately after policy reform when rent growth exceeds price growth by 3.6% or more, and rent control has benefitted tenants.

Publication metadata

Author(s): Dawson PJ

Publication type: Article

Publication status: Published

Journal: Journal of Agricultural Economics

Year: 2014

Volume: 65

Issue: 2

Pages: 406-419

Print publication date: 01/06/2014

Online publication date: 04/12/2013

Acceptance date: 01/10/2013

Date deposited: 30/09/2014

ISSN (print): 0021-857X

ISSN (electronic): 1477-9552

Publisher: Wiley-Blackwell

URL: http://dx.doi.org/10.1111/1477-9552.12048

DOI: 10.1111/1477-9552.12048

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