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Leveraging Wealth from Farmland Appreciation: Borrowing, Land Ownership, and Farm Expansion

Leveraging Wealth from Farmland Appreciation: Borrowing, Land Ownership, and Farm Expansion ABSTRACT: We study how increases in wealth from rapid appreciation of farmland influenced farmer decisions to borrow, buy land, and expand. Exploiting periods of high and low appreciation and a panel data model that allows for correlation between prior growth trends and the share of land owned, we find that a dollar increase in paper wealth led younger farmers 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 runup in farmland prices. We find no effect of land wealth on production or acres harvested. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Land Economics University of Wisconsin Press

Leveraging Wealth from Farmland Appreciation: Borrowing, Land Ownership, and Farm Expansion

Land Economics , Volume 91 (2) – Apr 13, 2015

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Publisher
University of Wisconsin Press
Copyright
Copyright by the Board of Regents of the University of Wisconsin System.
ISSN
1543-8325
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT: We study how increases in wealth from rapid appreciation of farmland influenced farmer decisions to borrow, buy land, and expand. Exploiting periods of high and low appreciation and a panel data model that allows for correlation between prior growth trends and the share of land owned, we find that a dollar increase in paper wealth led younger farmers 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 runup in farmland prices. We find no effect of land wealth on production or acres harvested.

Journal

Land EconomicsUniversity of Wisconsin Press

Published: Apr 13, 2015

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