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Abstract

While farmland rental markets are likely to be spatially differentiated, the fine spatial structure of row-crop quality land should have a significant effect on cash rent determination. This study provides a rigorous empirical understanding of the effect of land spatial heterogeneity on cash rental rates. The lacunarity index is employed to measure spatial heterogeneity of land quality, which is built directly upon a soil quality measure, the land parcel’s corn suitability rating index (CSR). A panel data random effect model is applied on annual survey data of farmland cash rental rates of Iowa for 1987-2009. As expected, land spatial heterogeneity has a statistically significant and negative effect on local cash rent rates. The effect’s origin warrants further research.

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