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Revisiting The Relationship Between Land Price And Parcel Size

Author

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  • Ritter, Matthias
  • Huttel, Silke
  • Odening, Martin
  • Seifert, Stefan
Abstract
Hedonic land price models often use parcel size as an explanatory variable. Empirical analyses, however, are rather ambiguous regarding the direction and the size of the effect of this variable on farmland values. The objective of this paper is to investigate this size-price relation in detail and to derive recommendations for an appropriate specification of hedonic land price models. Our analysis consists of three steps. First, we conduct a meta-analysis based on a comprehensive literature review. Second, we analyze a dataset of more than 80,000 land transactions in Saxony-Anhalt, Germany, using the non-parametric locally weighted scatterplot smoothing (LOWESS) estimator. This unconditional smoothing algorithm identifies negative size-price relations for very small and large plots, whereas it finds a positive relation for medium plot. We use this finding in our third step, a hedonic land price model, in which the size-price relation is modelled conditional on land and buyer characteristics. From these steps, we conclude that the complex relationship between land price and plot size cannot be captured by a simple functional form since it is affected by several economic factors, such as economies of size, transaction cost, and financial constraints.

Suggested Citation

  • Ritter, Matthias & Huttel, Silke & Odening, Martin & Seifert, Stefan, 2019. "Revisiting The Relationship Between Land Price And Parcel Size," 2019 Conference (63rd), February 12-15, 2019, Melbourne, Australia 285062, Australian Agricultural and Resource Economics Society (AARES).
    • Handle: RePEc:ags:aare19:285062
    DOI: 10.22004/ag.econ.285062
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    Cited by:

    1. Ritter, Matthias & Hüttel, Silke & Odening, Martin & Seifert, Stefan, 2019. "Revisiting the relationship between land price and parcel size," FORLand Working Papers 08 (2019), Humboldt University Berlin, DFG Research Unit 2569 FORLand "Agricultural Land Markets – Efficiency and Regulation".
    2. Pates, Nicholas J. & Kim, GwanSeon & Mark, Tyler B. & Ritter, Matthias, 2020. "Windfalls or wind falls? The Local Effects of Turbine Development on US Agricultural Land Values," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304611, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    Land Economics/Use;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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