A DYNAMIC-MODEL OF ACREAGE ALLOCATION WITH GENERAL AND CROP-SPECIFIC SOIL CAPITAL

We develop an empirically tractable model of acreage allocation decisi ons in which farmers consider impacts of current crop production on fu ture soil productivity. Because of the soil productivity effects, futu re crop prices are shown to affect current acreage allocations. Govern ment programs which alter farmers' expectations of future crop prices relative to current prices also alter farmers' consideration of soil p roductivity effects of current acreage allocations. Reduced form and s tructural versions of our model are shown to yield reasonable paramete r estimates.