Land rental markets in transition: Theory and evidence from Hungary

SummaryThis paper analyzes the determinants of household farms’ participation in land rental markets in transition countries. We derive several hypotheses on the impact of households’ human capital, land endowment, land quality and prices, transaction costs, rural credit, and labor market constraints. Our empirical analysis uses data from a representative survey of more than 1 400 Hungarian household farms and Hungarian official statistics. Land rental markets reallocate land to households with better farm management capacities. Households combine buying and renting of land to extend their farms. Land ownership is fragmented and land consolidation occurs through renting. The domination of corporate farms in some regions restricts households’ access to land.