Zoning, returns to scale, and the value of undeveloped land

When land markets are incomplete, parcels can be scaled to make control compatible with use and to internalize externalities. We show that an arbitrage-proof equilibrium implies an increasing and strictly concave relationship between the value and size of land parcels. Undeveloped land sales in Sout...

Full description

Saved in:
Bibliographic Details
Published inThe review of economics and statistics Vol. 73; no. 4; pp. 699 - 704
Main Authors Brownstone, D, De Vany, A
Format Journal Article
LanguageEnglish
Published Cambridge, Mass Elsevier Science Publishers 01.11.1991
Harvard University Press, etc
MIT Press Journals, The
Subjects
Agricultural land
Agricultural land use
Arbitrage
Comparative studies
costs and returns
Economic models
Economic theory
Economies of scale
Equilibrium
Impacts
Industrial agriculture
Land development
land markets
Land ownership
Land use
land values
Market equilibrium
Outliers
parcel size
Property values
Regression analysis
size
valuation
Variable coefficients
Zoning
California
United States > US
Online AccessGet full text

Cover

More Information
Summary:When land markets are incomplete, parcels can be scaled to make control compatible with use and to internalize externalities. We show that an arbitrage-proof equilibrium implies an increasing and strictly concave relationship between the value and size of land parcels. Undeveloped land sales in Southern California strongly confirm the theoretical relationship. We find that zoning primarily restricts the conversion of land from agriculture to residential and industrial uses relative to the competitive equilibrium. The scale of land units is an effective private instrument for providing compatible land use even in the presence of strong zoning.
ISSN:0034-6535
1530-9142
DOI:10.2307/2109409