The implicit market price of soil erosion: An estimation using a hedonic model with spatial spillovers

Marcelo Caffera, Felipe Vásquez Lavín, Manuel Barrientos, Daniel Rodríguez Anza and Leonidas Carrasco‐Letelier

Agricultural Economics, 2024, vol. 55, issue 6, 963-984

Abstract: We estimate the implicit market price of soil erosion using quarterly data of 2824 agricultural farms traded in Uruguay between 2000 and 2014. A unique feature of our estimation is that we allow for possible spatial spillovers. We find evidence of a negative and statistically significant association between erosion and land values. On average, an additional loss of 1% of the original topsoil due to erosion is associated with a direct (own) decrease of .24% in the per‐hectare price of agricultural land (P‐value: .012, 95% CI: −.0042, −.0005). In 2023 dollars, this is equivalent to a decrease of USD 8.7 in the average price per hectare, or USD 1130 in the price of the average farm. In terms of tons of soil, the average value is $.24 a ton. Finally, considering the 50 km radius of our spatial model, the value of losing 1% of topsoil is $15.8 million. The value of our estimates is sensitive to our measure of erosion and our specification of the spatial‐temporal weighting matrix, but the statistical association is robust.

Date: 2024
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