Unpacking the Farmland Capitalization Effect of Ethanol Establishment

Gabriel S. Sampson and Jisang Yu

Applied Economic Perspectives and Policy, 2026, vol. 48, issue 4, 1185-1200

Abstract: We unpack the impact of expansions in ethanol production—as measured by proximity to newly constructed ethanol plants and capacity expansions—on farmland values using land transaction data from Kansas in combination with modern causal inference techniques. We first show that Two‐Way Fixed Effects (TWFE) estimation with data aggregated to the county and township level leads to an average land value effect ranging from 4% to 9% for parcels located within 50 km of an ethanol plant. However, using a modern difference‐in‐difference estimator, we find no evidence of a statistically significant effect on farmland values. Furthermore, our analysis reveals no indication that land value proximity premiums rose following the 2005 Energy Policy Act. We find evidence that the average treatment effect detected by conventional TWFE is largely driven by land transactions in the proximity of ethanol plants that were established prior to the 2005 Energy Policy Act. Proximity to ethanol plants established after the 2005 Energy Policy Act has a smaller and less robust effect on land values.

Date: 2026
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https://doi.org/10.1002/aepp.70085

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Persistent link: https://EconPapers.repec.org/RePEc:wly:apecpp:v:48:y:2026:i:4:p:1185-1200

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