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

Jeremy Weber () and Nigel Key

MPRA Paper from University Library of Munich, Germany

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.

Keywords: real estate appreciation; borrowing, collateral, farm wealth (search for similar items in EconPapers)
JEL-codes: Q1 R1 (search for similar items in EconPapers)
Date: 2014-07-01
New Economics Papers: this item is included in nep-agr
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