Transaction Costs and the Present Value

P. de Fontnouvelle and Sergio Lence

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: The present study introduces a theoretical land pricing model that allows for proportional transaction costs, and a corresponding kernel regression test. The model is tested with farmland returns data for 20 individual states, and also with two aggregate U.S. level series. The constant discount rate (CDR) present value model (PVM) of farmland prices is strongly rejected. However, it is found that the behavior of land prices and rents is consistent with the CDR-PVM in the presence of empirically observed values of transaction costs. Findings are very robust in that they apply to both individual state-level data and the U.S. aggregate level series.

Date: 2002-01-01
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Citations: View citations in EconPapers (14)

Published in Southern Economic Journal, January 2002, vol. 68, pp. 549-565

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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:5263

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