Agricultural land tax and farm‐level land‐use changes and output supply response

Abstract

Purpose

The purpose of this paper is to contribute to land redistribution policy which is presently not only one of the most defining political and development issues, but also perhaps the most difficult in South Africa.

Design/methodology/approach

The paper develops a programming model for farm‐level land‐use changes and output supply response to estimate the effects of agricultural land tax in South Africa. The modeling approach is based on baseline statistics from a descriptive analysis.

Findings

The results indicate that changes in land use and output supply response are marginal. The highest effects are observed on irrigated areas of sunflower seed (0.23 percent) and wheat (0.17 percent). This results to declines in supply of 0.07 percent for sunflower seeds; 0.06 percent for wheat; 0.04 percent for soya beans; 0.03 percent for each of white maize and sorghum; and 0.02 percent for yellow maize production. Therefore, levying a land tax may discourage investment on irrigation facilities and consequently irrigated farming.

Originality/value

The programming modeling approach captures the significant differences in the farm characteristics and the overarching profit‐maximizing behaviour of farmers, which an econometric approach may not easily capture.

Citation

Olubode‐Awosola, F. (2010), "Agricultural land tax and farm‐level land‐use changes and output supply response", China Agricultural Economic Review, Vol. 2 No. 1, pp. 79-93. https://doi.org/10.1108/17561371011017513