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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 <p>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.</p> 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

Abstract

<p>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.</p>

Journal

Land EconomicsUniversity of Wisconsin Press

Published: Apr 13, 2015

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