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We empirically analyse the determinants ofcash rent levels for agricultural land in Lower Saxony,Germany. We are the first to apply a spatialeconometrics approach that accounts for two types ofspatial dependence simultaneously to cash rent data atthe farm-level. Our empirical results underline theusefulness of such an approach. Farm characteristicswhich serve as a proxy for the marginal value of rentedacreage for the tenant as well as variables whichrepresent local competition on the land market aresignificant. Among the farm characteristics, operatingrevenue per hectare, share of high-value crops, soilquality, share of rented acreage, share of arable landrelative to rented acreage, and animal density aresignificant while, ceteris paribus, neither labour normachinery/buildings per hectare nor farm size aresignificant. In particular, animal density at the regionallevel increases the cash rent, underlining the importanceof local competition on the land market. The analysisalso shows that subsidies which foster competitionamong farmers for rented land boost landlords’incomes. Thus, evaluation of set-aside programs orevaluation of public support for investment in pig orpoultry production or renewable energies has to takesuch side-effects into account.
