Regional Growth Impacts on Agricultural Land Development: A Spatial Model for Three States

By Hailu, Yohannes G.; Brown, Cheryl | Agricultural and Resource Economics Review, April 2007 | Go to article overview

Regional Growth Impacts on Agricultural Land Development: A Spatial Model for Three States


Hailu, Yohannes G., Brown, Cheryl, Agricultural and Resource Economics Review


In this study we attempt to understand the relationship between regional growth in population, employment, and per capita income, and farmland development in Maryland, Pennsylvania, and West Virginia. A spatial simultaneous equations model is estimated using county-level data. Results indicate that while county income growth and agricultural land value increases in neighboring counties increase the rate of farmland loss, growth in county agricultural land values, increases in agricultural land density in neighboring counties, and increases in agricultural income per farm reduce farmland losses. Farmland protection policies were not significant in reducing agricultural land development. This approach, focused on regional growth, provides insight into linkages between growth and agricultural land development that can potentially enhance land use planning.

Key Words: farmland protection, regional growth, rural development, spatial growth equilibrium model

Understanding development of agricultural land requires understanding the economic forces that allocate land to different uses. Private sector land use decisions are typically determined by household utility maximization and profit maximization by businesses. Land development in suburban and rural communities impacts economic, fiscal, environmental, and social attributes of communities, with wide-ranging implications for income, employment, the tax base, public services, and nonmarket environmental goods that have a direct impact on quality of life (Heimlich and Anderson 2001). Studies have documented that the cost of providing public services is a function of the pattern of development (Burchell and Shad 1998). In addition, the development of agricultural land may impose long-term costs on society (Porter 1997).

Farmland is multifunctional in the sense that it not only acts as a factor of production in agriculture, for which competitive markets exist, but also provides scenic beauty and open space which are not necessarily accounted for in its market price (Batie 2003, Abler 2004). A number of studies have analyzed the non-market benefits of agricultural land and how the market may fail to internalize these externalities (Plantinga and Miller 2001, Irwin and Bockstael 2001, Bowker and Didychuk 1994, Kline and Wichelns 1996, Ready, Berger, and Blomquist 1997, Rosenberger and Loomis 1999, Rosenberger and Walsh 1997). When positive externalities from farmland are present, market allocation of farmland may not maximize social welfare, resulting in excessive conversion of agricultural land. In addition, development of agricultural land is for all practical purposes irreversible and results in a loss of option value, which may not be taken into account by land markets (Northeast Regional Center for Rural Development 2002). As a result, many states have initiated some type of land use policy to slow the loss of farmland and its benefits (Nickerson and Hellerstein 2003).

One popular farmland protection program that has been implemented in many states in the U.S., including the three states in this study, is the Purchase of Development Rights (PDR) program, also known as the Purchase of Agricultural Conservation easements (PACE) program. This program was enacted in Maryland in 1980, in Pennsylvania in 1989 (AFT 2005), and in West Virginia in 2002. Under this program, a farmer sells the right to develop the land to a government agency or private organization, which places a permanent easement on the land restricting its future use to agriculture. Funds used to purchase these easements come from a variety of sources, including taxes on land transfers; federal funds for purchasing easements are available through the Farm and Ranch Land Protection Program authorized by the 2002 Farm security and Rural Investment Act (Natural Resources Conservation Service 2004).

Farmland preservation programs are aimed at slowing the rate of farmland conversion and maintaining agriculture in counties with increasing development pressure from rising population and income (Klein and Reganold 1997, Daniels 1999). …

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Regional Growth Impacts on Agricultural Land Development: A Spatial Model for Three States
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