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Abstract
This study estimates the impact of changes in market returns and government payments on
farmland values across Canada using data from 1959 to 2009. A recursive simultaneous equation
model is estimated to account for the counter-cyclical relationship between market returns and
government payments. The results indicate that farmland values are more responsive to changes
in market returns than in government payments, but both are important drivers of land values. The
elasticity of land values with respect to government payments is lower than has been observed
in the United States. In addition, the partial decoupling of government payments has not reduced
their impact on farmland values.