How does the land market capitalize environmental, historical and cultural components in rural areas? Evidences from Italy

Farmland can supply a wide variety of ecosystem services, i.e. provision of food and fibre, as well as regulating, supporting, recreational, aesthetic and cultural services. In addition, farmland can be characterized by the presence of anthropic elements, i.e. archaeological sites and historical rural buildings, from which the community can obtain further non-material benefits, namely cultural heritage values, recreation and tourism, etc. However, all these services and land components can be strongly influenced by different levels of farming intensity, a condition that can damage their capacity to supply the related functions (public goods). Such land-market failures could be adjusted by acquiring information on how the above non-farming characteristics, i.e. environmental, historical and cultural determinants, are capitalized in farmland value when farming intensity varies. To this aim, a real estate survey was carried out in Italy in order to investigate the land market of traded farms cultivated under specific crops and located in two areas with different levels of farming intensity. The analysis considered farming and non-farming determinants of selling price and used a hedonic model method based on the ordinary least squares regression corrected for spatial autocorrelation. The results highlighted that the farming determinants were capitalized in selling price as expected in both areas, while the impacts of the non-farming characteristics were extremely diversified between the areas. In the extensively farmed area, the environmental, historical and cultural determinants tended to be positively capitalized, thus favouring their preservation. However, in the intensively farmed area, these were positively or negatively capitalized according to whether or not their overexploitation could allow increased yields, respectively. In yet other cases, some non-farming determinants were not capitalized at all in either area. These trends provided useful insights for the design of ad hoc market-based schemes able to enhance land market functioning and the maintenance of these components in agricultural areas with different levels of farming intensity.