Performing Department
AGRICULTURE, ENVIRONMENTAL AND DEVELOPMENT ECONOMICS
Non Technical Summary
Land use change could affect the competitiveness of agricultural production in the United States in a number of ways: By removing productive land from agricultural uses; by reducing investments in capital and machinery and altering productivity of farm operations; by shifting the proportion of land devoted to different types of crops; and by reducing productivity of land available for agriculture and raising cash rents; etc. Given all these changes, it could be more difficult for agricultural producers to compete in the world economy. It is useful to understand how the urbanization process affects crop choice, farming practices land tenure, cash rents, and capital investments in the agricultural sector. This research explores how crop choices, farming practices, cash rents, land tenure, capital intensity, and land use change are related to agricultural competitiveness. Our hypothesis is that farmer choices over capital investment and crops affect the marginal
productivity of cropland and hence, land-use change, and that land-use change in turn affects the choice of capital investment and crops. The models developed by the research team will show how cropping choices are affected by urbanization pressures; how crop and capital intensity decisions influence the marginal productivity of land and hence land use change; and how land tenure affects crop choices and capital intensity decisions. The research focuses on the Midwestern United States, although the methods developed can be utilized more broadly.
Animal Health Component
(N/A)
Research Effort Categories
Basic
(N/A)
Applied
100%
Developmental
(N/A)
Goals / Objectives
The overall goal of this research is to explore how agriculture adjusts and adapts to changing land uses, particularly urbanization. The basic hypothesis is that as development occurs, agriculture remains competitive by adapting with a range of options, such as changing crops, renting land, adjusting capital intensity, and adjusting cash rents. The specific objectives of this proposal are: (1) To assess how crop choices in the Midwestern United States are affected by urbanization pressures; (2) To develop a model that predicts crop choice and land use simultaneously; and (3) To explore the effect of non-farm ownership on farming practices and to explore how the capital-land ratio changes at different distances from urban centers and different land rental rates. The objectives in this research will provide a richer understanding of how crop choices are affected by development pressures, how crop choices affect development processes, and how land tenure affects crop
choice and capital intensity decisions within the agricultural sector. Given the widespread changes in land use that have occurred within the United States over its history, as well as within the past 10-20 years, the results of this research will help policy makers understand the potential implications of future development, and shifts in population, on the agricultural sector. This is particularly important for the Midwestern US, which has experienced large increases in population in recent years (USDA - NRI).
Project Methods
For our first two objectives, our general approach is to estimate several econometric models of land-use change and cropping pattern change with increasing levels of endogeneity among land-use and cropping choice decisions. County level data for 12 Midwestern States (Ohio, Indiana, Illinois, Michigan, Minnesota, Wisconsin, Iowa, Missouri, Kansas, Nebraska, North Dakota, South Dakota) will be used for these analyses. The first objective develops an econometric system model that predicts cropping choice across the sample of counties. The proportion of land in different types of crops (corn/soybean, vegetables/fruits, cover crops) is expressed as a multinomial logistic function with a number of different explanatory variables, including commodity prices, land values, capital investments, soil quality, weather variables, population density, distance to cities, roads, average property value and age, etc. The second objective develops a series of economic models to test
whether land use change and cropping choices are endogenous. For this objective we will employ two different methods. We will begin with logit models, which have been widely used in the literature. Second, we will develop a Markov-Chain model to allow for endogenous interactions among land-use and crop choices. The Markov model has not been as widely applied in economics, and it allows for a wide range of assumptions about correlations across error terms in different equations. The third objective focuses on individual observations of farming operations, and explores the relationships among land tenure, cash rent, cropping decisions, and capital to land ratios at different distances from urban centers and with different population densities. We will collect data on a sample of Ohio farmers to explore whether cash rent, capital to land ratio, and crop choice are endogenously determined. The survey data will also be linked to aggregate data from Census of Agriculture (USDA-NASS) and NRI
(USDA- NRI). We will estimate a system of equations that allows us to explore how capital intensity, cash rents, and crop choices interact at different distances from urban centers and with different population densities.