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Abstract
The proportions of land values generated by farm program payments and farm returns are
examined using an extended income capitalization model. The extended income capitalization
model addresses the identification issue introduced by the counter-cyclical nature of farm
program payments and farm returns. Procedures are presented that allow the estimation of
agriculture land value shares without requiring explicit knowledge or assumptions with respect to
the net land rental shares of farm returns or farm program payments. Results from the panel
recursive or triangular-structure simultaneous equation model applied to 48 states in the U.S. for
the period 1938 to 2006 indicate on average 41-45.6 percent and 54.4-59 percent of the
agricultural land values can be identified with farm program payments and farm returns
respectively. Spatially, at the resource regional level the contribution of farm program payments
was as low as 16.8 percent in Eastern Upland region compared to a high of 51 percent in the
Southern Plains region.