Cash Rents and Land Values in U.S. Agriculture

A firm‐level land valuation model is deduced which depends on the expected growth rate in net cash returns to land, inflation expectations, and property, income, and capital gains taxes. It is then aggregated to obtain an aggregate two‐sector land valuation model. That model is then estimated for twenty‐four individual states for the period 1960–81. In addition, a pooled cross‐sectional regression model is estimated combining the twenty‐four‐state data. The model results demonstrate that significant state differences exist in the land market and that in many states, agricultural land values are influenced by nonagricultural demand for land.