Skip to main content
Transaction Costs and the Present Value “Puzzle” of Farmland Prices
Southern Economic Journal
  • Patrick de Fontnouvelle, United States Securities and Exchange Commission
  • Sergio H Lence, Iowa State University
Document Type
Publication Version
Published Version
Publication Date
The present study introduces a theoretical land pricing model that allows for proportional transaction costs, and a corresponding kernel regression test. The model is tested with farmland returns data for 20 individual states, and also with two aggregate U.S. level series. The constant discount rate (CDR) present value model (PVM) of farmland prices is strongly rejected. However, it is found that the behavior of land prices and rents is consistent with the CDR-PVM in the presence of empirically observed values of transaction costs. Findings are very robust in that they apply to both individual state-level data and the U.S. aggregate-level series.

This article is from Southern Economic Journal 68 (2002): 549, doi:10.2307/1061717. Posted with permission.

Works produced by employees of the U.S. Government as part of their official duties are not copyrighted within the U.S. The content of this document is not copyrighted.
File Format
Citation Information
Patrick de Fontnouvelle and Sergio H Lence. "Transaction Costs and the Present Value “Puzzle” of Farmland Prices" Southern Economic Journal Vol. 68 Iss. 3 (2002) p. 549 - 565
Available at: