Spatial panel models for the analysis of land prices
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The paper investigates the determinants of cropland value in 12 selected Midwestern U.S.A. States in the years 1971-
2009. We adopt the Ricardian Present Value Model (PVM) as the theoretical framework, and therefore focus on the
relationship between land value and cash rents, expecting to find a positive one. In order to model the spatial effects
that characterize the data, we estimate a spatial dynamic panel data model with fixed individual effects. The employed
dataset represents an improvement with respect to earlier studies because it refers to a rather homogeneous sample of
States and only to cropland rather than farmland in general, and also excludes the value of buildings from the value of
farmland. Also, net, rather than gross, cash rents per acre of cropland are used, as this reflects the net return to the
landowner. Our results allow the computation of short and long run cropland value elasticity to cash rents, whose
close-to-1 value appears to support the PVM. We also highlight the importance of taking spatial effects into
consideration when addressing this field of analysis.