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

Weber, Jeremy and Key, Nigel (2014): Leveraging Wealth from Farmland Appreciation: Borrowing, Land Ownership, and Farm Expansion. Forthcoming in: Land Economics (May 2015)

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 run-up in farmland prices. We find no effect of land wealth on production or acres harvested.

• Item Type: MPRA Paper
• Language: English
• Keywords: real estate appreciation; borrowing, collateral, farm wealth
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics

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