Farmland Prices, Structural Breaks and Panel Data

Posted: 26 Jun 2008

See all articles by L. Gutierrez

L. Gutierrez

Università degli Studi di Sassari

Joakim Westerlund

Lund University - Department of Economics

Ken Erickson

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Abstract

Previous time series evidence has indicated that farmland prices and cash rents are not cointegrated, a finding at odds with the present value model of farmland prices. We argue that this failure to find cointegration may be due to low power of tests and to the presence of structural change representing a shifting risk premium on farmland investments. To accommodate this possibility, we use panel unit root and cointegration methods that are more powerful than conventional time series methods and allow for breaks in the cointegration relationship. Our results, based on a large panel covering 31 US states between 1960 and 2000, suggest that the present value model of farmland prices cannot be rejected.

Keywords: farmland prices, present value model, non-stationary panel data analysis, structural breaks

JEL Classification: C23, G12, Q14

Suggested Citation

Gutierrez, Luciano and Westerlund, Joakim and Erickson, Ken, Farmland Prices, Structural Breaks and Panel Data. European Review of Agricultural Economics, Vol. 34, No. 2, pp. 161-179, 2007, Available at SSRN: https://ssrn.com/abstract=1151621 or http://dx.doi.org/jbm018

Luciano Gutierrez (Contact Author)

Università degli Studi di Sassari ( email )

Piazza Universita
Sassari, 07100
Italy

Joakim Westerlund

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07 Lund
Sweden

Ken Erickson

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States

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