Measuring the effect of farmland preservation on farm profitability

Abstract

Purchase of development rights (PDR) programs have been created in 27 states to preserve farmland resources. These programs seek to advance several societal objectives, including the protection of farmland from development, retention of rural amenities, and promotion of the economic viability of farming. Using New Jersey farm-level data, this study evaluates whether participation in a state PDR program improves farm profitability. The propensity score matching method is used to correct for selection bias arising from the voluntary nature of these programs. No statistically significant profit differential is found between preserved and observationally equivalent unpreserved farms in our full sample of 4029 farms. When the analysis is replicated across different farm types, we find weak evidence that the profitability of preserved residential lifestyle/retirement farms is lower than that observed for their unpreserved equivalents. In contrast, we find that small farms (<$100,000 in annual sales) operated by individuals for whom farming is a principal occupation earn $414 to $436 more per acre in profit than their observationally equivalent unpreserved counterparts.