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Does proprietor wealth influence small business decisions? Land appreciation and farm business borrowing, land ownership, and output

  • Weber, Jeremy G.
  • Key, Nigel D.

We study how increases in wealth from the appreciation of U.S. farmland influenced farm proprietor decisions to borrow, buy land, and expand. Exploiting periods of high and low appreciation that caused different increases in wealth for proprietors owning a larger or smaller share of their farmland, we find that each dollar increase in paper wealth led younger proprietors to increase real-estate-secured borrowing by 48 cents. Land purchases accompanied the increase in borrowing, supporting the view that collateral-based lending may be contributing to the recent run-up in farmland prices. We find no effect of land wealth on production or acres harvested.

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File URL: http://purl.umn.edu/150408
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Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 150408.

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Date of creation: 2013
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Handle: RePEc:ags:aaea13:150408
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