Land and Infinite Debt Rollover

Abstract

Many analyses of infinite debt rollover omit productive land, whereas prior work argues that land precludes rollover. We show that when land's income share remains bounded away from zero, every equilibrium is bubbleless and Pareto efficient, ruling out rollover. If instead the land share vanishes and the autarky interest rate is below rent growth, every equilibrium contains a land bubble and permits rollover despite Pareto efficiency. Iowa farmland data show falling yields and converging district prices as price--rent ratios rise. This pattern rejects a bubbleless Gordon model but is consistent with a rational bubble earning the return on land.