  We study the long-run behavior of land prices when land plays the dual role
of factor of production and store of value. In modern economies where
technological progress is faster in non-land sectors, when the elasticity of
substitution in production exceeds 1 at high input levels (which always holds
if non-land factors do not fully depreciate), unbalanced growth occurs and land
becomes overvalued on the long-run trend relative to the fundamental value
defined by the present value of land rents. Around the trend, land prices
exhibit recurrent stochastic fluctuations, with expansions and contractions in
the size of land overvaluation.
