Thesis finds that increased land leasing, vs. land ownership, reduces productivity; lower capital gains taxes may stimulate yields

In Finland, a thesis by research scientist Sami Myyrä from MTT Agrifood Research Finland concluded that the readiness of tenant farmers to maintain the condition of their fields is diminished by substantial land tenure insecurity, and that the tenant farming system contributes to “a low-productivity trap in which no one, whether tenant farmer or landowner, has the financial incentive to restore fields.”

According to Myyrä, land leasing has increased to one-third of all land under cultivation in Finland and has accelerated since Finland joined the EU — finding that soil pH is “statistically significantly lower”. Accordingly, Finnish grain growing productivity has been rising only slowly, at an annual rate of 0.6-1.7 per cent over the long term. According to Myyrä this is in part due to the growth in field leasing, and increases in farm sizes do not “appear to have automatically increased productivity.”

Myyra said that farmers are reluctant to sell land because of capital gains tax issues, and found that a decrease in the capital gains rate could increase ownership rates, as opposed to increase in leasing, and increase the grain supply.

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