a period of years (such as 1922-1960). 9/ The first five terms in the 

 equation identify the independent effects of each of the variables affecting 

 rent. These independent effects are obtained by holding all variables con- 

 stant at the base year levels except the one under consideration. Since all 

 the variables change over the period of the study, their interaction produces 

 additional effects on the change in land rent per acre. The last two terms 

 of the equation express these interaction effects. 



In this study, the base year is 1922 for Virginia and 1925 for North 

 Carolina and the ending year for both States is 1960. Since changes in rent 

 must exclude returns to management, the budgets for the base years and ending 

 year used to estimate the components of change in rent per acre were for the 

 tenant-operated farms. 



Results 



Data from the tenant enterprise budgets used for deriving values for 

 the variables in equation (3) are presented in tables A and 5. 10 / All 

 changes in the variables in both States were positive except those in hours 

 of labor used per pound of tobacco produced. The hours of labor decreased 

 because of labor-saving technologies applicable to preharvest operations, and 

 because labor required per pound of tobacco in producing and marketing 

 operations decreases with increases in yields per acre. In both States, 

 yields, prices of tobacco, and overhead and operating costs more than doubled 

 during the study period. 



In table 6, the components of changes in income and costs affecting 

 land rent add up to the actual changes in the returns to land which were 

 indicated earlier in tables 1 and 2 on tenant-operated farms. In both States, 

 the component increasing rent the most was the increase in price per pound 

 of tobacco, and the largest deterrent to the increase in rent was the 

 increase In returns per hour of labor. The effect of the increases in price 

 of tobacco, which includes a component due to the programs, was much higher 

 than the $271 and $230 shown as independent components for North Carolina 

 and Virginia, respectively. Consequently, the negative components of change 

 in rent per pound (returns to labor per hour and other costs per hour) were 

 overbalanced, causing the interaction of changes in yield and in rent per 

 pound (+[AyAr]) to have positive effects. Similarly, the negative, independent 

 (nonprogram) effects of increased returns per hour of labor was more than that 

 presented in table 6; thus, the magnitude of the positive effects of both 

 interaction components ([AwAly] and [AyAr]) was reduced. The direct effect 

 of increasing yields upon rent per acre is the result of its independent 

 component and the interaction of increases In yield and rent per pound of 

 tobacco. However, there are indirect positive effects of yield increases, 

 such as influences upon labor required per pound of tobacco and upon the 



9/ The expressions r and Ar (rent and change in rent per pound of 

 tobacco) are put in the equation instead of (p-wl-k) and (Ap-lAw-wAl-AlAw-Ak) . 



10 / Copies of all budgets used in this study may be obtained, upon re- 

 quest, from the Natural Resource Economics Division, Economic Research Service 

 U.S. Department of Agriculture. 



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