URBAN SPRAWL AND FARMLAND PRICES

A theoretical model of farmland valuation is developed to explicitly account for three effects of urban sprawl: conversion of farmland to urban uses, effect on agricultural returns, and speculative effect as represented by farmland conversion risk. This model is estimated using county-level data in the continental United States. Evidence is found for all three effects of urban sprawl on farmland values. Counties more accessible to major urban centers have higher net agricultural returns. Subsidiary evidence supports that the latter effect may be attributed to survival of (or conversion to) high-valued agriculture around urban centers. Key words: hedonic determinants, land prices, spatial econometrics, urban sprawl. Urban sprawl and land use has become a ma-jor policy issue since the 1980s. The expansion of urban areas has reduced farmland around many major metropolitan areas (Greene and Stager 2001). This conversion of farmland to urban uses has led to higher farmland val-ues, particularly in areas of rapid urban growth (Shi, Phipps, and Colyer 1997). This article de-termines whether the higher farmland prices in urban areas can be partly explained by higher returns to farmland near urban areas. The urban growth model of Capozza and Helsley (1989) has been used to estimate the effect of urbanization on farmland val-ues at the parcel (Cavailhes and Wavresky 2003) and county level (Plantinga and Mille