Evidence of land hoarding behavior in US agriculture
AbstractPurpose – The purpose of the study is to test how land owners respond to the appreciation of land values in the presence of speculation. This paper introduces the concept of “land hoarding,” which is land owners' response to higher land prices by selling more land up to a point beyond which accelerated land price appreciation would lead to land hoarding. Specifically, this paper examines the effect of land value appreciation higher than the opportunity cost of selling the land (measured by treasury-bill (T-bill) rate) on land sale and land hoarding. Design/methodology/approach – A theoretical framework is developed to understand the demand for agricultural land retention with and without speculation, the former informing land hoarding behavior. A linear regression model was introduced and estimated using ordinary least square (OLS) method. A panel data model and analysis is also introduced, and following appropriate model selection tests, a fixed effect panel data estimation method is implemented. Data from 48 states, spanning from 1950 to 2004, are utilized. Findings – An inverse relationship is found between the rate of land value appreciation and the demand for land by farmers, suggesting that the standard direct relationship between appreciation and land supplied to development holds. However, the additional finding of an inverse relationship between the rate of land value appreciation in excess of the risk-free rate of return and agricultural land development confirms the existence of an identifiable speculative demand component that involves land hoarding Practical implications – To the extent to which the findings are broadly applicable, one policy implication is that enhanced land retention can be achieved through market mechanisms. For example, the notion that reduced T-bill rates can actually result in market triggered land preservation is an interesting policy related finding. Equally interesting is the notion that policies that can trigger increases in the rate of appreciation of farmland may also potentially result in the agricultural hoarding of land. Obviously, enhanced profitability in agriculture due to programs targeting viability, commodity price support, reduction of regulation or market expansion programs can potentially affect land retention. Originality/value – This paper introduces the “land hoarding hypothesis.” High rates of land appreciation can be expected to signal that holding the land may yield better returns than selling it, suggesting that if rates of land appreciation become significantly high enough, farmers may begin to hoard land, not sell it, to maximize long-term returns. This concept can be valuable to market-based agricultural land retention programs at the urban fringe. By linking speculative behavior, land demand and existence of a hoarding behavior under some conditions, this paper adds value and originality to the literature.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Agricultural Finance Review.
Volume (Year): 70 (2010)
Issue (Month): 3 (November)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stavins, Robert & Plantinga, Andrew & Lubowski, Ruben, 2002.
"The Effects of Potential Land Development on Agricultural Land Prices,"
dp-02-11-, Resources For the Future.
- Plantinga, Andrew J. & Lubowski, Ruben N. & Stavins, Robert N., 2002. "The effects of potential land development on agricultural land prices," Journal of Urban Economics, Elsevier, vol. 52(3), pages 561-581, November.
- Plantinga, Andrew & Lubowski, Ruben & Stavins, Robert, 2002. "The Effects of Potential Land Development on Agricultural Land Prices," Working Paper Series rwp02-012, Harvard University, John F. Kennedy School of Government.
- Blanchet-Scalliet, Christophette & El Karoui, Nicole & Martellini, Lionel, 2005. "Dynamic asset pricing theory with uncertain time-horizon," Journal of Economic Dynamics and Control, Elsevier, vol. 29(10), pages 1737-1764, October.
- Govindasamy, Ramu & Italia, John & Adelaja, Adesoji O., 2001. "Predicting Willingness-To-Pay A Premium For Integrated Pest Management Produce: A Logistic Approach," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 30(2), October.
- Govindasamy, Ramu & Hossain, Ferdaus & Adelaja, Adesoji O., 1999. "Income Of Farmers Who Use Direct Marketing," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 28(1), April.
- Falk, Barry L. & Lee, Bong-Soo, 1998. "Fads Versus Fundamentals in Farmland Prices," Staff General Research Papers 1306, Iowa State University, Department of Economics.
- Rigoberto A. Lopez & Farhed A. Shah & Marilyn A. Altobello, 1994. "Amenity Benefits and the Optimal Allocation of Land," Land Economics, University of Wisconsin Press, vol. 70(1), pages 53-62.
- Titman, Sheridan, 1985. "Urban Land Prices under Uncertainty," American Economic Review, American Economic Association, vol. 75(3), pages 505-14, June.
- Parks, Peter J. & Quimio, Wilma Rose H., 1996. "Preserving Agricultural Land With Farmland Assessment: New Jersey As A Case Study," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 25(1), April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.