Nature of Dynamic Relationships Between Farm Real Estate Values and Federal Farm Program Payments
AbstractThe objective of this study is to test the dynamic relationships among variables including farm real estate values, farm returns, farm program payments, and real interest rates in an income capitalization model. Our analysis is unique in multiple ways: (1) it covers the period beginning with the introduction of the first farm bill in 1933 through 2006; (2) assumes endogeneity of the variables, and (3) develops a dynamic modeling framework. Endogeneity is assumed among farm real estate values, farm program payments, and farm receipts since the direction of causality is unclear from a theoretical standpoint. Results indicate that policy makers are reactive rather than pro-active in making transfers to farmers. Once farm program payments are implemented, payments have positive impacts only in the short run on the value of farm real estate. However, considering endogeneity, the model suggests that it is possible that farm program payments have a lasting positive indirect impact (via farm returns) on the value of farm real estate.
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Bibliographic InfoPaper provided by North Dakota State University, Department of Agribusiness and Applied Economics in its series Agribusiness & Applied Economics Report with number 44823.
Date of creation: Oct 2008
Date of revision:
Dynamics; Farm programs payments; Farm real estate values; Vector error correction model; U.S. data; 1933-2006; Agricultural Finance; Farm Management; Q18; H50; C32;
Find related papers by JEL classification:
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-14 (All new papers)
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