Restriction of Farm Ownership as Rent‐seeking Behavior: Family Farmers Have It Their Way

Abstract

Abstract. Restriction of foreign ownership of U.S. farmland has an obvious cost of foregone capital gains to farmers Yet their push to achieve state regulation of foreign investment in agricultural land has a sound economic basis. If required acreage expansion and high prices for land combine to force small, family farmers out of business, the value of their accumulated human capital falls precipitously, since it is soil specific With a large foreign demand for farmland which induces a tremendous rate of land price inflation, capital gains on their land swamp potential human capital losses. However, marginal participation in the U.S. farmland market by foreigners creates capital gains on land which are insufficient to compensate farmers for lost human capital, and creates a rationale for regulation The empirical results demonstrate that the pattern of legislative restrictions against foreign ownership of farmland is a function of the relative political power wielded by family farmers.