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

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  • 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.

Suggested Citation

  • Hendricks, Nathan P. & Janzen, Joseph P. & Dhuyvetter, Kevin C., 2012. "Subsidy Incidence and Inertia in Farmland Rental Markets: Estimates from a Dynamic Panel," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(3), December.
  • Handle: RePEc:ags:jlaare:142350
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    Cited by:

    1. Barrett E. Kirwan & Michael J. Roberts, 2016. "Who Really Benefits from Agricultural Subsidies? Evidence from Field-level Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(4), pages 1095-1113.
    2. repec:eee:pubeco:v:159:y:2018:i:c:p:16-32 is not listed on IDEAS
    3. Hyunseok Kim & GianCarlo Moschini, 2018. "The Dynamics of Supply: U.S. Corn and Soybeans in the Biofuel Era," Center for Agricultural and Rural Development (CARD) Publications 18-wp579, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    4. Ram Ranjan, 2015. "How Prolonged Droughts And Farm Subsidies Influence Entrepreneurial Ventures By Farmers," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 20(04), pages 1-21, December.
    5. Stephen O'Neill & Kevin Hanrahan, 2016. "The capitalization of coupled and decoupled CAP payments into land rental rates," Agricultural Economics, International Association of Agricultural Economists, vol. 47(3), pages 285-294, May.
    6. Peter Haan & Martin Simmler, 2016. "Wind Electricity Subsidies = Windfall Gains for Land Owners? Evidence from Feed-In Tariff in Germany," Discussion Papers of DIW Berlin 1568, DIW Berlin, German Institute for Economic Research.
    7. Brown, Jason P. & Fitzgerald, Timothy & Weber, Jeremy G., 2016. "Capturing rents from natural resource abundance: Private royalties from U.S. onshore oil & gas production," Resource and Energy Economics, Elsevier, vol. 46(C), pages 23-38.
    8. Kuethe, Todd H. & Paulson, Nick, 2014. "Crop Insurance Use and Land Rental Agreements," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170528, Agricultural and Applied Economics Association.
    9. Paul Feichtinger & Klaus Salhofer, 2016. "Decoupled Single Farm Payments of the CAP and Land Rental Prices," Working Papers 652016, Institute for Sustainable Economic Development, Department of Economics and Social Sciences, University of Natural Resources and Life Sciences, Vienna.

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