INFLATION, TAXES, AND THE VALUE OF AGRICULTURAL ASSETS

Recent literature suggests that the value of land may increase faster than the value of depreciable assets when inflation increases. Here, we affirm that result for the specific conditions facing agriculture-where the supply of agricultural land is nearly perfectly inelastic and the supply of depreciable inputs is nearly perfectly elastic. The result is confirmed using three different data sets. The result implies that factor intensity of land relative to depreciable assets may change over time in response to changes in inflation, even in the absence of biased technical change.