Land Income Research Articles

Agency Status for the Cooperative Farm Credit System: Discussion

At long last, the material in the Lins-Barry paper has been presented in a public forum where it can be evaluated and, if appropriate, challenged. To the uninitiated, it may seem strange that much of the paper merely presents conclusions of the U.S. Department of Agriculture (USDA) and Arthur D. Little (ADL) studies cited, as would a library term paper. But it contributes more than that because these studies are in the library! The USDA study was never released. The Farm Credit System (FCS), which paid for the ADL study, apparently considers it an internal rather than a public report. Nevertheless, the main conclusions of these studies have appeared in the rural press and have been used by policy advisors. Thus the Grace Commission found its empirical basis for recommending restraints on FCS lending in the implicit ADL conclusion (attributed in turn to a Chase Econometrics model) that such lending was largely responsible for land price increases. Lins and Barry politely describe this conclusion as controversial and not ... consistent with past research on land values. As research results showing that land prices have been determined mainly by land income and rents continue to accumulate, stronger language such as worthless might be considered. Unfortunately, both studies also reached a similar and erroneous conclusion-that a private FCS, although relatively creditworthy, would find it difficult to market even its current volume of securities. Before challenging this notion and offering a different argument for retaining agency status, however, it should be noted that Lins and Barry have assembled a useful summary and analysis of FCS regulatory and tax preferences. In several instances, they show why the preference affects the competitive position of the FCS less than one might at first suppose, which implies that these preferences may be a less important issue than many private lenders appear to believe. The viability of a private FCS, however, was the question highlighted by the USDA and ADL studies, and thus their flawed analyses of this question deserve greater attention than the contrary view briefly stated by Lins and Barry in their concluding comments. On the basis of discussions with security dealers and investors, the USDA and ADL studies concluded that a private FCS would be unable to raise the volume of funds now required or projected. But, at the same time, both studies indicated that a private FCS would enjoy a relatively good credit rating. This is an incompatible combination; in fact, impossible. Let us see why this is so, and then how the studies erred. In the nation's credit markets, there is on one side of the ledger a schedule of the total flow of funds supplied by savers, the Federal Reserve System, and others, which is much altered, if at all, by switching the FCS from agency to private status. On the other side, competing for this total flow, are potenti l borrowers that range throughout the full spectrum of credit quality, with credit quality representing an assessment of the odds that the borrower will develop repayment difficulties. Each borrower has a demand schedule that shows the amount of funds he wants to borrow at alternative interest rates. In such a market, it is axiomatic that, as one descends down the spectrum of credit quality, each borrower in turn receives all of the funds he wants-at increasing interest rates, of course -until the total funds supplied to the market are exhausted, leaving the remaining potential borrowers with lower quality ratings crowded out. That is, if one finds a borrower of given quality successfully borrowing at a certain interest rate, then all borrowers of higher quality will have obtained their full demands at that rate or lower; otherwise, lenders Emanuel Melichar is a senior economist in the Division of Research and Statistics, Board of Governors of the Federal Reserve System

Formation of Industries, Land Values (or Prices), and Economic Rents in Kagoshima City

In this study, we clarified the following points.(1) Kagoshima City has a population of about five hundred thousand. Its regional characteristics, briefly described, are-the warm and rainy climate, the“Shirasu” Plateau, ashfalls of Sakurajima volcano, a large influx of population; Nishi Station has become the center of traffic. Both oshimatsumugi (pongee) and shochu (an alcoholic drink) are the typical local industries, and the city's wholesale trade occupies the largest position in the Southern Kuyshu District.(2) We analyzed the formative factors of land values in urban and non-urban land use statically and dynamically. By this, we clarified the relation between land values and accessibility from the station or land productivity. Thus we made model formulas about their relations.(3) The city center with the highest land price moved to Tenmonkan St. from the front of Kagoshima Station with the traffic improvements and the new residential developments in front of inland. A secondary central place (subcenter shopping streets) is developing in front of Nishi Station which has become the transportation gateway, but the land prices there are now about half of the city center.(4) We made model formulas of the land prices and the proportions of land utilization in the shopping streets, And then tried to analyze the land prices and the proportions of different types of stores. Moreover, we tried to calculate the locational competitive index of the major commercial functions. We also made model formulas of the relation between the flow of pedestrian traffic and land prices, and the number of visitors of the city and the trend of the highest land values. Thus, we could grasp the formation mechanism of land prices.(5) We analyzed quantitatively the disparity between economic rents (net income of land) and land prices of representative industries (stores, inns, hotels & factories) in the city. From this analysis, we examined the various locational conditions in detail.(6) We believe that this study will provide important information for comparison with many other cities in the future.Note: In this paper, “land value”means the land values assessed by fixed property tax and capitalized land values, while“land price”means the actual selling price.

Participation of Beneficiaries in Financing Urban Services: Valorization Charges in Bogota, Colombia

The operation of valorization programs in Bogota, Colombia is evaluated as a means of facilitating urban services provision in growing cities of developed countries. The major conceptual issues involving the allocation and collection of valorization charges, the fiscal and financial consequences of valorization programs, and their impacts on land use and income distribution are examined. It is concluded that, while not an unqualified success, valorization as applied in Bogota is a fiscal instrument that has resulted in significant financial benefits for the city. It has been instrumental in enlarging the choice and accessibility of lower income groups to jobs and to residential building sites. The major difficulties with the system in Bogota have centered on collection problems resulting from generous payment terms and delays in enforcing a vigorous collection policy.

The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question

The classic example of an unshiftable tax is the general tax on pure rental income. Since Ricardo, economists have believed that the annual net rental income of unimproved land falls by the amount of the annual tax and its price by the capitalized value of this tax. This paper shows that these conclusions are false, that the tax on pure land rents is at least partly shifted, and that the price of land may be increased by the imposition of a tax. Implications are suggested for the analysis of the corporate income tax and the taxation of natural resources.

Impact of Farm Size on the Bidding Potential for Agricultural Land

AbstractA theoretical model is constructed to determine the maximum bid price that would be made for an acre of land by a decisionmaker with a given set of characteristics, capabilities, and expectations. The variables included that have an impact on the maximum bid price are net income, income variability, wealth, degree of risk aversion, marginal income tax rate, rate of pure time preference, and expected rate of growth in land income and prices. A numerical illustration of the model, developed for cash‐grain farmers in Iowa, demonstrates the relative importance of the variables in determining bid‐price differentials among farm‐size classes.

Buddhist Monks and Nuns Change Their Occupation and Return to the Laity

In the past, the livelihood of Buddhist monks and nuns on the Chinese mainland basically depended on land income, mendicancy, services for the dead, and gratuities from worshipers at the temples. After the Communist Chinese regime was established and pressed ahead with "land reform" and various other militant social movements, the monasteries lost all their lands and, in general, the people were completely preoccupied with their own immediate problems and had little time or resources available for religious services, worshiping at temples, almsgiving, etc., so that these activities virtually disappeared, spontaneously and without any explicit prohibition. Consequently, the livelihood of Buddhist monks and nuns throughout the mainland soon became a problem, and the Chinese Communist authorities quickly took advantage of this to "persuade" these monks and nuns to abandon their inveterate clerical way of life and participate in "productive labor." Hence many of the younger clerics were forced to "shed their vestments" and seek other ways of earning their living. Thus "departed monks and vacant temples" became a universal phenomenon. The extracts reproduced below are typical reports concerning this sort of situation.

Resistance to Tithes in the Middle Ages

The system of compulsory tithes in the Middle Ages has long been used by protestant and liberal historians as a stick with which to beat the medieval Church. ‘This most harassing and oppressive form of taxation’, wrote H. C. Lea in his well-known History of the Inquisition, ‘had long been the cause of incurable trouble, aggravated by the rapacity with which it was enforced, even to the pitiful collections of the gleaner’. Von Inama-Sternegg remarked on the growing hatred of tithes in the tenth, eleventh, and twelfth centuries, especially among the small free landholders, ‘upon whom the burden of tithes must have fallen most heavily’. Gioacchino Volpe said that tithes were ‘the more hated because they oppressed the rich less than the poor, the dependents on seigneurial estates less than the small free proprietors to whose ruin they contributed…. At that time tithes were both an ecclesiastical and secular oppression, a double offence against religious sentiment and popular misery’. G. G. Coulton, writing before the introduction in England of an income tax at a rate of over ten per cent., proclaimed that before the Reformation tithes ‘constituted a land tax, income tax and death duty far more onerous than any known to modern times, and proportionately unpopular’.

Guar, a summer row crop for the Southwest

Guar, with a 50-year crop history slowly establishes its agronomic and economic merit. Guar is now in USDA’s “new crops” program, among crops that are substitutable in land use and income yield for surplus crops. Guar has 4 virtues. It is (1) an annual crop, (2) a leguminous plant, (3) adapted to mechanical planting, cultivation, and harvesting, and (4) the gum made from it goes to an industrial market. Only a part of this market is supplied now, and the potential usage could be upped several-fold.