Abstract
This paper argues that the rapid agricultural expansion of the cerradoregions in Brazil is due to the low price of land in these regions, as compared with theother agricultural regions of Brazil and abroad. This low price of land is, in turn,attributed not only to the greater distance of these regions from the main markets, butalso to the limitations of natural resources (the extremely harsh drought period, whichlimits agricultural activities to grains and livestock) and, above all, to technologicalinnovations that “produced” an abundance of land of good quality. In order to showmore clearly how this process has taken place, the paper develops a model of the landmarket that allows for “production of land,” and derives the implications of such amodel for production functions and total factor productivity (TFP) analyses.
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