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

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

Abstract

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.

Suggested Citation

  • Weber, Jeremy G. & Key, Nigel D., 2013. "Does proprietor wealth influence small business decisions? Land appreciation and farm business borrowing, land ownership, and output," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150408, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea13:150408
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    References listed on IDEAS

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    More about this item

    Keywords

    wealth; asset appreciation; farmland; borrowing; Agribusiness; Community/Rural/Urban Development; Land Economics/Use; D22; Q12; D3;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • D3 - Microeconomics - - Distribution

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