The Political Economy of Farmland Ownership Regulations and Land Prices
Shon M. Ferguson
Research Institute of Industrial Economics (IFN)
W. Hartley Furtan
affiliation not provided to SSRN
Jared G. Carlberg
University of Manitoba - Department of Agribusiness and Agricultural Economics
April 6, 2011
Agricultural Economics, Vol. 35, No. 1
One of the most ubiquitous forms of agricultural regulation is a restriction on farmland ownership. One Canadian example of a farmland ownership restriction is The Saskatchewan Farm Security Act (FSA), passed in 1974. The purpose of this article is to explain, using a political economy framework, why the FSA was implemented and to estimate the effect of the FSA on Saskatchewan farmland values. A Present Value (PV) model is used to estimate the relationship between land values, rents, and the regulation. The Hausman endogeneity test reveals that the regulation variable is endogenous with the land price. The sign of the regulation variable is negative, which fits with the theory, i.e., the more stringent the regulation the lower the land value. We estimate that the regulation lowered Saskatchewan farmland prices by an average of 4 to 34 US$/acre, depending on whether ordinary least squares (OLS) or two-stage least squares (TSLS) is employed in the estimation, over the period of 1974-2001.
Keywords: Agricultural policy, Regulation, Rent seeking, Farmland ownership
JEL Classification: D72, Q15Accepted Paper Series
Date posted: April 10, 2011
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