Putting land to work: an evaluation of the economic effects of recultivating abandoned farmland

Abstract

Agricultural land abandonment is a relevant occurrence in mountainous and peripheral regions all over the world. While both positive and negative environmental consequences of this abandonment are documented (depending on the specific location and scale), in rural areas it is always linked to a reduction in production and income. To address some of these problems, the several administrative layers within the European Union (EU) have put in place public policies that focus either on the immediate causes or on the consequences. Policies aimed at promoting recultivating formerly abandoned fields have usually tried simultaneously to address both the causes (e.g., to increase farm productivity/output) and the consequences (i.e., to manage fields according to specific criteria), but the potential economic outcomes of these measures are unknown. In this paper, we estimate the effect of recultivation of abandoned farmland on the economy of a case study region in NW Spain (Galicia). We propose that this effect can be used to guide decisions on the viable expenditure levels of recultivation policy. Concerning the methodology, we relied upon geographic information systems to show the area of land suitable for recultivation is relevant: i.e. recultivation policies could result in an increase of at least 16% of current farmland. Using Standard Production Coefficients per hectare we show that the total output (at constant prices) generated by the recultivation of abandoned land would amount to 413.3 million euros/year. Calculations based on input output methods suggest that the benefits of the recultivation policies would be an increase of 1% of the total regional Gross Value Added (GVA). We show that the input-output methods underestimate the benefits of cultivation policies based on total factor productivity (TFP) improvements, which fundamentally come from the reallocation of factors among the rest of the sectors of the economy. In particular, if recultivation policies increase agricultural TFP by 26% (in order to increase the demand of land by 16%) the overall effect rises to around 3% of the total regional GVA. These results suggest that the margin for the implementation of recultivation policies before they turn unadvisable from a purely economic point of view is rather ample