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Econometric Modeling of the Capitalization Formula for Farmland Prices
Author(s) -
Burt Oscar R.
Publication year - 1986
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1241645
Subject(s) - economics , economic rent , capitalization , econometrics , inflation (cosmology) , econometric model , monetary economics , microeconomics , linguistics , philosophy , physics , theoretical physics
An econometric model is formulated to explain the dynamic behavior in farmland prices. A second‐order rational distributed lag on net crop‐share rents received by landlords captures the dynamic movements of prices and performs well in conditional post‐sample forecasts. The adjustment path of land prices in response to a perturbation in rents is a protracted dampened cycle. The implicitly estimated tax‐free capitalization rate on rent associated with equilibrium land price is 4.0%. Neither the expected rate of inflation nor an exponential trend on rent expectations has a significant effect on land prices.