The Amenity Value of Agricultural Landscape and   Rural-Urban Land Allocation

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The Amenity Value of Agricultural Landscape and Rural-Urban Land Allocation

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1. The Amenity Value of Agricultural Landscape and Rural-Urban Land Allocation Aliza Fleischer and Yacov Tsur Department of Agricultural Economics and Management The Hebrew University of Jerusalem

10. Rationale: Population and income growth ? Increases housing demand (urban land) Increases demand for environmental amenities (incl rural landscape) Ag landscape is public good ?? market failure and need for regulation

11. Objectives: Analyze the role of agricultural landscape in rural-urban land allocation, allowing landscape amenity value to vary across crops Evaluate welfare loss due to market failure Study effects of population and income growth Draw policy implications

12. Model: Urban sector: N households, derive utility from housing land (?H =LH/N), other private goods z, and crop-specific agricultural landscape (L = (L0,L1,L2,…,LJ): u(z,?H,L) = up(z,?H) + ue(L) Max u over {z, ?H} subject to budget constraint gives demands z(rH,y) and ?H(rH,y). Inverting ?H(rH,y) ? inverse demand for urban land DH(?H,y): 

14. Urban sector WTP for Ag landscape Indirect utility: v(y , L) = up(z(rH,y),?H(rH,y)) + ue(L) Willingness to pay (WTP) to preserve landscape pattern L = (L0,L1,L2,…,LJ), denoted wtp(y,L) is defined by v(y + wtp(y,L) , 0) = v(y , L)

15. Conditional WTP: Conditional WTP to preserve land type j (Lj) given all other crops land allocation (L-j):

16. Ag sector: Farmland demand NA identical farmers growing K crops Fk(xk,?k) crop k production function, MAX_{xk} xk(?k), k = 1,2,…,K (prices suppressed as arguments) ?k(?k) = pkF(xk(?k),?k) - pxxk(?k), k = 1,2,…,K At land rental rate r, farm’s demand for cropland k: ?k?(Lk/NA) = r, k = 1,2,…,K Demand for Ag land: horizontal summation:

18. Market Allocation Market equilibrium: The region size is given, thus: Market allocation:

20. Social allocation Max: FOC: Social land allocation:

23. Application to the South Sharon region in Israel Non-metropolitan region 10,190 ha, of which 200 ha are parks Number of households: about 70,000

24. Agricultural Data and Land Use Distribution of the Study Region

25. CRS technology: farmers' derived demand for land

26. Urban land demand

27. Urban Land demand estimation

28. WTP data, specification & Estimation Data collected via double-bounded-dichotomous-choice elicitation method Focus groups, pre-test and face-to-face questionnaire among 350 respondents Respondent received pictures of crops landscape; confronted with scenario under which the agricultural landscape would be developed Preserving ag landscape requires a tax (at the bid level)

29. Transforming Crops to Crop-groups based on data

30. WTP specification (permits interaction)

31. Descriptive stat of WTP data

32. Estimation results (MLE)

33. Market Allocation

34. Social Allocation

35. Population effect (doubling the population)

36. Summary of empirical findings

37. Main empirical findings: Accounting for Ag landscape reduces urban land allocation by 10 % and increases farmland allocation by about 13 % Aggregate WTPs for Ag landscape are currently about 16 % of total return to farming and will increase to 33 % with a doubling of the population Population growth calls for an increase in Ag land (contrary to market allocation)

38. Policy:

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