Asset Fixity and the Distribution of Rents from Agricultural Policies
We examine the concomitant claims that agricultural land can be regarded as a fixed factor of production and that rents derived from government policies accrue only to landowners. Characteristics of the long-run, equilibrium relation between farmland rental payments and government policies reveal whether farmland is a fixed factor of production. Examining whether these variables are cointegrated shows the extent to which the claims are true. Further, examining returns rather than directly examining asset price movements gives us a precise test, unencumbered by expectations hypotheses. Our results show that policy-derived rents accrue to landowners, rather than to farmers.