The Effects of Potential Land Development on Agricultural Land Prices

Andrew Plantinga, Ruben Lubowski and Robert Stavins
Additional contact information
Andrew Plantinga: Oregon State U
Ruben Lubowski: Harvard U

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: We conduct a national-scale study of the determinants of agricultural land values to better understand how current farmland prices are influenced by the potential for future land development. The theoretical basis for the empirical analysis is a spatial city model with stochastic returns to future land development. From the theoretical model, we derive an expression for the current price of agricultural land in terms of annual returns to agricultural production, the price of recently developed land parcels, and expressions involving model parameters that are represented in the empirical model by nonlinear functions of observed variables and parameters to be estimated. We estimate the model of agricultural land values with a cross-section on approximately three thousand counties in the contiguous U.S. The results provide strong support for the model, and provide the first evidence that option values associated with irreversible and uncertain land development are capitalized into current farmland values. The empirical model is specified in a way that allows us to identify the contributions to land values of rents from near-term agricultural use and rents from potential development in the future. For each county in the contiguous U.S., we estimate the share of the current land value attributable to future development rents. These results give a clearer indication of the magnitude of land development pressures and yield insights into policies to preserve farmland and associated environmental benefits.

Date: 2002-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (165)

Downloads: (external link)
https://research.hks.harvard.edu/publications/work ... ?PubId=1127&type=WPN

Related works:
Journal Article: The effects of potential land development on agricultural land prices (2002)
Working Paper: The Effects of Potential Land Development on Agricultural Land Prices (2002)
Working Paper: The Effects of Potential Land Development on Agricultural Land Prices (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp02-012

Access Statistics for this paper

More papers in Working Paper Series from Harvard University, John F. Kennedy School of Government Contact information at EDIRC.
Bibliographic data for series maintained by ().