Econometric Modeling of the Capitalization Formula for Farmland Prices

Oscar R. Burt

American Journal of Agricultural Economics, 1986, vol. 68, issue 1, 10-26

Abstract: An econometric model is formulated to explain the dynamic behavior in farmland prices. A second-order rational distributed lag on net crop-share rents received by landlords captures the dynamic movements of prices and performs well in conditional post-sample forecasts. The adjustment path of land prices in response to a perturbation in rents is a protracted dampened cycle. The implicitly estimated tax-free capitalization rate on rent associated with equilibrium land price is 4.0%. Neither the expected rate of inflation nor an exponential trend on rent expectations has a significant effect on land prices.

Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:68:y:1986:i:1:p:10-26.

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