Issues at the RuralUrban Fringe: Discussion

1
Issues at the Rural-Urban Fringe Discussion

• Dave Lewis
• Department of Agricultural and Applied Economics
• University of Wisconsin-Madison

AAEA Sessions, ASSA annual meeting San Francisco,
CA January, 2009
2
Issues at the Rural-Urban Fringe

• Acquiring land for open-space conservation has
  become a defining feature of urban and rural
  landscapes.
• 18.4 million acres of private land were
  conserved between 1998 and 2005 in the U.S.
• 15 billion spent during this time majority of
  expenditures at state and local levels.
• Over 80 of the more than 1000 local and regional
  open-space referenda passed between1998 and 2003.

Source The Trust for Public Land
3
Issues at the Rural-Urban Fringe

• Implicit in all this activity is some form of
  market failure in the allocation of open-space.
• Open-space (conserved or otherwise) can provide
  external benefits (e.g. recreation, privacy,
  landscape character, etc.).
• Evidence that open-space becomes capitalized into
  neighboring land values.
• Open-space provision is generally viewed as the
  provision of a local public good.

4
Issues at the Rural-Urban Fringe

• General question for economics what is the
  efficient pattern of developed and undeveloped
  land?
• How much open-space should be conserved by the
  government?
• What should the spatial pattern of open-space
  look like?
• External benefits from direct use of open-space
  tend to be local.
• Spatial pattern of habitat important for
  wildlife.
• How does the allocation of open-space alter the
  equilibrium landscape?
• What policy mechanisms can be useful? How to
  spatially target policies?

5
Issues at the Rural-Urban Fringe

• Related issues examined in this session
• How can policy instruments be structured to yield
  a more efficient landscape? (Bento, Franco, and
  Kaffine)
• What empirical methods can be used to quantify
  open-space benefits? (Klaiber and Phaneuf)
• Is clustered development efficient? (Towe)

6
Issues at the Rural-Urban Fringe

• Development Taxes and Revenue-Recycling (Bento,
  Franco, Kaffine)
• Revenue-raising instruments can be used to
  alleviate other land-use distortions.
• Tax development and use revenue to i) buy
  easements at the fringe, ii) alleviate blight in
  the core.
• Several illuminating numerical results
• Efficiency gains from recycling.
• Distribution of gains gt which landowners win,
  which lose.
• Distributional analysis potentially very useful
  in structuring incentives.

7
Issues at the Rural-Urban Fringe

• Development Taxes and Revenue-Recycling (Bento,
  Franco, Kaffine)
• Q What is the efficient landscape?
• Should be solvable numerically.
• Can a uniform tax achieve the efficient
  landscape?
• What if a development tax saves too much land?
• Recycling revenues towards land-use could make
  things worse.
• Recycling revenues towards other things (e.g.
  crime, schools, etc.) would be more efficient.

8
Issues at the Rural-Urban Fringe

• Empirical methods for quantifying open-space
  benefits (Klaiber and Phaneuf)
• Open-space can change the equilibrium landscape.
• Are sorting models necessary?
• Useful for examining non-marginal changes.
• Are the additional capabilities of the sorting
  model simply the result of additional
  assumptions?
• Dataset is impressive.
• Goal is to specify hedonic/sorting models with
  best practices.
• Results indicate significant differences across
  alternative modeling strategies.

9
Issues at the Rural-Urban Fringe

• Empirical methods for quantifying open-space
  benefits (Klaiber and Phaneuf)
• Why are results different across models?
• Is open-space identified in the hedonic? Could
  neighborhood fixed effects (block group level)
  help?
• How much are the sorting results driven by an
  assumption of frictionless moving?
• Is there an argument that simple models might be
  preferable when misspecification is present?
• How would a random bidding model perform?
• A simulated dataset where the true values of
  open-space are known might be useful.

10
Issues at the Rural-Urban Fringe

• Valuation of open space by Type (Towe)
• Q land price effects of subdivisions with
  clustered development and open-space?
• Results
• Preserved agriculture in clustered subdivision
  provides 6 to 11 premium.
• No premium when clustered subdivision consists of
  open-space owned by homeowners.
• Repeat-sales results particularly interesting
• Interaction between clustered subdivisions and
  growth in neighboring development.
• Value of buffering from clustered subdivisions
  increases as development grows.

11
Issues at the Rural-Urban Fringe

• Valuation of open space by Type (Towe)
• Why does preserved agriculture yield a premium
  but not homeowner-owned open-space?
• Intuition suggests the opposite.
• Is land good for agriculture also good for
  development? E.g. well-drained slopes.
• Q is it more efficient to cluster all parcels
  with smaller lots and more communal open-space?
• Depends on whether neighboring open-space is a
  substitute for private lot size.
• Little evidence on this, yet interaction terms in
  the hedonic could be used to shed light.

12
Issues at the Rural-Urban Fringe

• Summary
• Many issues to examine regarding the efficient
  allocation of developed and undeveloped land.
• Papers here provide contributions for
• Policy mechanisms.
• Empirical methods.
• Clustering regulations.