Do Wealth Gains from Land Appreciation Cause Farmers to Expand Acreage or Buy Land?

Recent increases in farm real estate values in the United States have increased farm equity. By exploiting periods of high and low appreciation that caused various increases in wealth for farmers owning various shares of their farmland, we examine whether U.S. grain farmers expanded their acres harvested or acres owned in response to an increase in their land wealth. We find that land wealth had little effect on farm size. However, for similarly-sized farms, a larger ownership share (10 percentage points) led to an increase in the growth of land owned (2 percentage points). Because older farmers own more of the land that they farm, greater land appreciation slows the rate at which younger farmers acquire land relative to older farmers.