Accumulation and Rental Behavior in the Market for Farmland

A farmer's choices of tenure and farm size result from a complex interplay of economic factors, technology, entrepreneurial ability, and personal preferences. This paper examines the qualitative effects of these factors on tenure and farm size in a dynamic optimization framework. One implication of the theoretical model is that changes in technology should cause systematic differences to be observed between rates of return on farmland and rates earned on comparable long-term assets. This implication is supported by an empirical test. Key words: land accumulation, land rental, nonpecuniary benefits, technical change. Many postwar structural changes in U.S. ag-riculture, such as the increase in average farm size and the decline in the agricultural labor force, are well understood and at least partially explained by technological change. A less not-ed, but nonetheless important, development has been the evolution of a farm tenure system characterized by two stylized facts: the full-owner operator has been displaced by the part-owner operator as the dominant tenure cate-gory for large commercial farms (table 1 and figure 1); and tenant farming, the traditional entry point on the agricultural ladder, has de-clined greatly in importance. While the break-down of the tenant farming system has been attributed (particularly in the South) to the in-troduction of labor-saving technical innova-tion (Day), the switch from full-owner oper-ator to part-owner operator is less understood. Two bodies of literature are most relevant to this study: the literature on farmland price determination and that on tenure choice. Most farmland price studies have separated land price determination from the choices of far