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Subsidy Incidence and Inertia in Farmland Rental Markets: Estimates from a Dynamic Panel

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Author Info

  • Hendricks, Nathan P.
  • Janzen, Joseph P.
  • Dhuyvetter, Kevin C.

Abstract

Recent econometric studies indicate that the effect of government farm subsidies on farmland rental rates may be smaller than once thought. This literature has corrected for bias due to expectation error in measured subsidy payments. We suggest two additional sources of bias—inertia and tenancy arrangements—that may explain the discrepancy between theoretical predictions and empirical estimates of subsidy incidence. We identify a model that accounts for these issues, employ panel data from Kansas to estimate it, and find that an additional dollar per acre of government subsidy increases rental rates by $0.12 per acre in the short run and $0.37 per acre in the long run.

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Bibliographic Info

Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 37 (2012)
Issue (Month): 3 (December)
Pages:

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Handle: RePEc:ags:jlaare:142350

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Related research

Keywords: cash rent; farm subsidies; incidence; Farm Management; Financial Economics; Land Economics/Use;

References

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  1. Barry K. Goodwin & Ashok K. Mishra & François Ortalo-Magné, 2011. "The Buck Stops Where? The Distribution of Agricultural Subsidies," NBER Chapters, in: The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies, pages 15-50 National Bureau of Economic Research, Inc.
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  9. Miranowski, John, 1993. "Understanding Farmland Price Changes," Staff General Research Papers 10696, Iowa State University, Department of Economics.
  10. Alfons Weersink & Steve Clark & Calum G. Turvey & Rakhal Sarker, 1999. "The Effect of Agricultural Policy on Farmland Values," Land Economics, University of Wisconsin Press, vol. 75(3), pages 425-439.
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  12. Sergio H. Lence & Ashok K. Mishra, 2003. "The Impacts of Different Farm Programs on Cash Rents," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 753-761.
  13. Patton, Myles & Kostov, Philip & McErlean, Seamus & Moss, Joan, 2008. "Assessing the influence of direct payments on the rental value of agricultural land," Food Policy, Elsevier, vol. 33(5), pages 397-405, October.
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  17. Barry K. Goodwin & François Ortalo-Magné, 1992. "The Capitalization of Wheat Subsidies into Agricultural Land Values," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 40(1), pages 37-54, 03.
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