Landowners' Riches: The Distribution of Agricultural Subsidies

The U.S. has a long history of providing generous support for the agricultural sec- tor. The 2002 Farm Bill provides in excess of $190 billion in flnancial support to U.S. agriculture, an increase of $72 billion over previous programs. Our paper is concerned with the distribution of these beneflts and their captures by landowners. We use a sam- ple of individual farm data to investigate the contribution of each of the main types of farm programs to land values. We flnd that subsidies have a signiflcant impact on farm land values especially price support programs with a built-in insurance feature. We also report evidence that cash lease rates incorporate a signiflcant portion of agricultural support, even if the farm legislation mandates that beneflts must be allocated to farm operators. Finally, taking advantage of the fact that some farmers rent land on both a cash and share basis, we flnd that farm programs that are meant to stabilize farm prices provide a valuable insurance beneflt. The methodology we use throughout the paper attempts to account for this insurance feature of many agricultural programs. It leads us to formulate a number of caveats associated with existing studies of policy efiects on farm land values.