Farm Wealth Inequality Within and Across States in the United States

Agricultural and Resource Economics Review,  Oct 2006  by Mishra, Ashok K,  Moss, Charles B,  Erickson, Kenneth W

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The Pacific and Mountain regions show a very similar pattern over time. The inequality in farm wealth within farms located in the Mountain region increased from 6.541 in 1996 to 7.160 in 2000, an approximately 9 percent increase over the period 1996-2000. This was due to rising inequality in farmland values and crop and livestock inventories. For example, during this period farms in the region observed a 3 percent rise in inequality in real estate assets (mainly farmland) coupled with a 12 percent rise in inequality in non real estate assets, such as crop and livestock inventories. However, during the 2000-2004 period, inequality in non real estate assets decreased by approximately 12 percent (Table 4), more than compensating for the rise in farmland values, less than 1 percent (Table 3). Farms located in the Pacific region (California, Oregon, and Washington) saw their share of equity rise because of increased foreign and domestic demand for grains, fruits, and vegetables. Within-farm wealth inequality in the Pacific region decreased by almost 17 percent, from 7.05 in 2000 to 5.826 in 2004. This is due to rising equality in farmland values and crop and livestock inventories. Table 3 shows that inequality in farmland values decreased by approximately 16 percent over the period 2000-2004, whereas inequality in crop and livestock inventories decreased by about 18 percent (Table 4). One plausible explanation is that farms in this region produce fruits and vegetables and high value crops, which have domestic as well as foreign markets, and also that the region's agricultural sector is expanding, such as in dairy farming and value-added through dairy farming. Another possible explanation for a 16 percent decrease in the within-state Theil entropy measure (2000-2004) in the Pacific states may be the influence of urbanization and other non-farm factors affecting the demand for and price of farmland in the Pacific states.

Changes in Inequality Between Farms Across State

The inequality in farm wealth across states (I^sub R^) in a given region accounted for 1 percent or less in the total inequality between 1996 and 2004. During this period, agriculture in the United States went through significant structural changes. The average size of farms increased through consolidation. These changes were partly due to a more open and global economy, greater capital and labor mobility, and the deregulation of capital markets. The expansion/consolidation of agriculture resulted in a more even distribution of wealth across the regions relative to the number of farms in each state. Table 2 shows that during the 19962000 period, between-farm inequality across states increased for Mountain states, Lakes states, and the Delta region. On the other hand, during the 2000-2004 period, between-farm inequality across states increased for the Appalachian and Delta regions. However, in absolute terms these changes are very small and have a low impact on the total inequality in farm wealth (Table 2). This suggests that since 1996 the regions have been becoming more similar, and/or that macroeconomic and structural differences in agriculture have declined.