Comparison of different land distribution mechanisms for a land-hungry region

Kabardino-Balkarian Scientific Center of the Russian Academy of Sciences, I.Armand st., 37a, 360004, Nalchik, Russia

^* Corresponding author: gurtuev@gmail.com

Abstract

This paper proposes an approach to the development an efficient land distribution mechanism for a particular land-hungry region. We separate budgetary and allocative efficiency and use general utility approach during evaluation of particular distribution mechanisms. We propose a model of potential land users, which allows quantifying the efficiency of a number of mechanisms of land distribution for land-hungry regions. Land users are represented as economic agents with bounded rationality and subjective utility functions. The model calculates allocation efficiency and budgetary efficiency as independent values and thus is more precise. It also has considerable flexibility and can be adjusted to specific agricultural technology and soil types. An analysis of the efficiency of various mechanisms for the test region showed that lottery mechanisms leads to losses of allocative efficiency compared with auction mechanisms. As for the budget revenues, the use of lottery mechanisms leads to much smaller losses of budgetary efficiency in comparison with simultaneous closed auctions of the first and second prices. But of all the mechanisms considered in the paper, the repetitive Vickrey auction leads to the smallest losses of budget efficiency in the model.