When Land Got Drier: Estimating the Impacts of Drought on Farmland Values in Alabama

Yingyun Lin, Mykel R. Taylor and Sunjae Won

No 360731, 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO from Agricultural and Applied Economics Association

Abstract: Drought is a major factor contributing to agricultural production losses in Alabama, bringing tremendous challenges to agricultural productivity and food security, but its impact on farmland value is still lacked. This study investigates the influence of droughts on farmland value in the State of Alabama from 2007 to 2021. We combine a unique parcel-level farmland data set with drought information provided by United States Drought Monitor (USDM). Based on hedonic price method, we employ spatiotemporal fixed effect models, a newly developed moment-based instrumental variable model and kinky least square method as well as several robustness checks, finding longer periods of drought exposure can lead to farmland value reduction, and its long-term impacts are stronger than short-term, reflecting such influences on market are gradual and slowly. We also reveal that the land value response to drought stress is heterogenous, across different land use types, rural-urban divisions, ownership types as well as agricultural policies coverage. Our findings highlight the critical role for climate-resilient adaptation strategies in land use policies.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 59
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea25:360731

DOI: 10.22004/ag.econ.360731

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