Valuing rights of first refusal for farmland preservation policy

Scott Malcolm, Joshua Duke and John Mackenzie

Applied Economics Letters, 2005, vol. 12, issue 5, 285-288

Abstract: The economic literature has failed to derive an explanation for the current value of rights of first refusal (ROFR) that may or may not manifest at some future time. A model explains this ex ante value in the context of agricultural land that may be converted to developed uses in the future. The results should help governments decide what prices should be paid to farmers for ROFR in urbanizing areas. ROFR ensure that governments have the opportunity to match a land developer's price for important agricultural parcels. Governments can then impose a conservation easement and market the land to farmers. Compared to traditional conservation easement policy, the ROFR variant should be cost effective because only parcels truly threatened with conversion are preserved.

Date: 2005
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DOI: 10.1080/1350485042000338671

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