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The Causal Structure of Land Price Determinants

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  • Titus O. Awokuse
  • Joshua M. Duke

Abstract

This paper investigates causation contemporaneously and dynamically to elucidate the persistent lack of agreement about what “causes” changes in farmland prices. The analysis synthesizes and extends previous investigations in this area by employing a combination of directed acyclic graphs (DAG), a recently developed modeling technique, and cointegrated VAR model. DAG theory and algorithms offer a powerful tool for analyzing contemporaneous causal relationships among economic variables. The results from this study confirm the importance of measures of return to farming, financial (credit market constraints) and/or macroeconomic activity as significant determinants of fluctuations in farmland prices. Le présent article examine la causalité de façon contemporaine et dynamique pour élucider le manque persistant de consensus quant aux causes de variations du prix des terres. L'analyse est une synthèse des études antérieures de même qu'un prolongement effectuéà l'aide d'une combinaison de graphes acycliques orientés (DAG), technique de modélisation mise au point récemment, et du modèle VAR cointégré. La théorie des DAG et les algorithmes constituent un outil puissant pour analyser les liens causals contemporains des variables économiques. Les résultats confirment l'importance du rendement de l'activité agricole, des contraintes financières (contraintes du crédit) et/ou de l'activité macroéconomique comme déterminants significatifs des variations du prix des terres agricoles.

Suggested Citation

  • Titus O. Awokuse & Joshua M. Duke, 2006. "The Causal Structure of Land Price Determinants," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 54(2), pages 227-245, June.
  • Handle: RePEc:bla:canjag:v:54:y:2006:i:2:p:227-245
    DOI: 10.1111/j.1744-7976.2006.00047.x
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    Cited by:

    1. Xiaodong Du & David A. Hennessy & William M. Edwards, 2007. "Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory," Center for Agricultural and Rural Development (CARD) Publications 07-wp454, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Lourival, Reinaldo & Caleman, Silvia Morales de Queiroz & Villar, Gabriela Isla Martins & Ribeiro, Ana Raquel & Elkin, Ché, 2008. "Getting fourteen for the price of one! Understanding the factors that influence land value and how they affect biodiversity conservation in central Brazil," Ecological Economics, Elsevier, vol. 67(1), pages 20-31, August.
    3. Todd Kuethe & Todd Hubbs & Mitch Morehart, 2014. "Farmland returns and economic conditions: a FAVAR approach," Empirical Economics, Springer, vol. 47(1), pages 129-142, August.
    4. Ifft, Jennifer & Wu, Shang & Kuethe, Todd, 2014. "The Impact of Pasture Insurance on Farmland Values," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(3), pages 1-16, December.
    5. Anderson, John D. & Thompson, W. Michael, II & Ibendahl, Gregory A. & Laughlin, David H., 2006. "The Effects of Changing Technology: The Impacts of a Changing Cost Structure on Land Tenure Arrangements in the Mississippi Delta, 1996 - 2004," 2006 Annual meeting, July 23-26, Long Beach, CA 21178, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Woltjer, Geert B. & Luijt, Jan L. & Jongeneel, Roelof A., 2008. "A Land Market Cycle in the Netherlands," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44376, European Association of Agricultural Economists.

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