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Three Essays on Land Use, Land Management, and Land Values in the Agro-Ecosystem
  • Wendong Zhang, Iowa State University of Science and Technology
Over the past few years, U.S. agriculture has experienced a myriad of macroeconomic and environmental changes that have profound implications for the well-being of farm households and the farm sector. An expanding biofuels market and growing export demand from China have led to rising agricultural commodity prices since mid-2000s. However, during the same time period, the residential housing market collapsed in 2007-2008 could impose a downturn pressure on farmland market, and there is a growing concern for environmental problems due to excessive agricultural nutrient runoff as well as stronger calls for more effective agri-environmental policies to curb nonpoint source agricultural pollution. Economic analyses of farmer decisions in this constrained and evolving environment are critical to understand how these changes have impacted farmer welfare and trade-offs with ecosystem and other societal benefits. Using individual-level data on farmland parcels and farmers from Ohio and Lake Erie basin, my dissertation examines how the recent housing market bust, expanding ethanol production, and rising environmental concerns have impacted farmers’ land use, land management, and land transaction decisions and the implications for farmer welfare.

Farm real estate represents over 80% of the balance sheet of the farm sector and is the single largest item in a typical farmer’s investment portfolio, and thus changes in farmland values could affect the welfare of the farmer household and farm sector in general. The first two chapters of my dissertation examine the trends and determinants of farmland values in the Midwest in the 2000s decade. In particular, the first chapter identifies the impact of the recent residential housing market bust and subsequent economic recession on farmland values, using parcel-level farmland sales data from 2001-2010 for a 50-county region under urbanization pressure in Western Ohio. My estimates from hedonic regressions reveal that farmland was not immune to the residential housing bust; the portion of farmland value attributable to urban demands for developable land was almost cut in half shortly after the housing market bust in 2009-2010. The second chapter investigates the capitalization of expanding biofuels market in surrounding farmland values. In particular, it tests for structural change in the relative effects of proximity to agricultural market channels before and after the construction of seven ethanol plants in or near western Ohio in late 2006 – early 2007. Instrumental variables regression on the matched sample demonstrates the positive capitalization of newly constructed ethanol plants.

The last chapter examines the interplay between agriculture and the environment and the trade-off between farmer welfare and ecosystem benefits resulting from alternative agri-environmental policies. Using individual level data on farm, field, and farmer characteristics, the third chapter develops a structural econometric model of farmer’ profit-maximizing output supply and input demand decisions, and quantifies the impacts of alternative nutrient management policies, including uniform and targeted fertilizer taxes. Results reveal that neither a fertilizer tax nor an educational campaign could alone achieve the policy goal of a 40% reduction in agricultural nutrient loadings into Lake Erie, and spatial targeting has the potential to improve the cost-effectiveness of the policies.
  • Farmland Values,
  • Housing Market Bust,
  • Ethanol,
  • Agri-Environmental Policy,
  • Spatial Targeting,
  • Lake Erie,
  • Harmful Algal Bloom,
  • Nonpoint Source Pollution,
  • Hedonic Price Method,
  • Propensity Score Matching,
  • Structural Model,
  • Integrated Ecological-Economic Model
Publication Date
July, 2015
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Citation Information
Wendong Zhang. "Three Essays on Land Use, Land Management, and Land Values in the Agro-Ecosystem" (2015)
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