dynamic model of acreage allocation with general and crop-specific soil capital

We develop an empirically tractable model of acreage allocation decisions in which farmers consider impacts of current crop production on future soil productivity. Because of the soil productivity effects, future crop prices are shown to affect current acreage allocations. Government programs which alter farmers' expectations of future crop prices relative to current prices also alter farmers' consideration of soil productivity effects of current acreage allocations. Reduced form and structural versions of our model are shown to yield reasonable parameter estimates.