The Dynamics of Farm Land Allocation– Short andLong Run Reactions in a Long Micro Panel

Abstract:

This study develops and estimates a dynamic multi-output model of farmers’ land allocation decisions that allows for the gradual adjustment of allocations that can result from crop rotation practices and quasi-fixed capital constraints. Estimation is based on micro-panel data from Danish farmers that includes acreage, output and variable input utilisation at the crop level. Results indicate that there are substantial differences between the short-run and long-run land allocation behaviour of Danish farmers and that there are substantial differences in the time lags associated with different crops. To our knowledge, this is the first dynamic micro-model of land allocation estimated on data from the temperate climate zone. Since similar farming conditions are found in northern Europe and parts of the USA and Canada, this result may be of wider interest.