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Land as production factor

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  • Paul Metzemakers

    ()

  • Erik Louw

    ()

Abstract

To justify industrial land development, municipal planning officials frequently use the argument that unrestricted availability of business sites will foster economic development and employment growth. However, to date convincing evidence to support this claim does not exist. So empirical research into this subject is warranted. Furthermore, this relationship implicitly assumes that the acreage of land, necessary for firms to be able to conduct their business, is a production factor like labour and capital. Unfortunately, research on land use from this perspective has since long disappeared from mainstream economic theory. Ample research is done on land use in relation to firm location, both empirically and theoretically. However, the amount of land as a production factor for firms is generally disregarded. This lack of theory may hinder research into the claim made by planning officials. Therefore, present paper seeks to reintroduce land as a production factor in economic theory. In this article we explore to what extent land can be regarded as a production factor. We aim to integrate this view into established economic models from urban land economics and real estate theory. We do so at the macro and at the micro economic level. At the macro level, the available amount of industrial land could be a factor in national economic growth, just like growth of the labour force. At the micro level we consider whether the theory of individual firms’ production function is able to incorporate the amount of land as production factor. We commence this paper with a historical overview of the treatment of land in economic theory, before we pursue a theoretical framework that incorporates land as a factor of production. The paper concludes with a comparison between land and the established production factors labour and capital.

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File URL: http://www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa05/papers/220.pdf
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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p220.

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Date of creation: Aug 2005
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Handle: RePEc:wiw:wiwrsa:ersa05p220

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References

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  1. Antonio Ciccone & Robert E. Hall, 1995. "Productivity and the density of economic activity," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 120, Department of Economics and Business, Universitat Pompeu Fabra.
  2. C. F. Sirmans & Arnold L. Redman, 1979. "apital-Land Substitution and the Price Elasticity of Demand for Urban Residential Land," Land Economics, University of Wisconsin Press, University of Wisconsin Press, vol. 54(2), pages 167-176.
  3. Antonio Ciccone, 1998. "Agglomeration-effects in Europe," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 499, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 1999.
  4. P. C. Cheshire & Stephen Charles Sheppard, 2004. "Land markets and land market regulation : progress towards understanding," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 566, London School of Economics and Political Science, LSE Library.
  5. P. C. Cheshire & Stephen Charles Sheppard, 2005. "The introduction of price signals into land use planning decision-making : a proposal," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 568, London School of Economics and Political Science, LSE Library.
  6. Paul Cheshire & Stephen Sheppard, 2004. "The Introduction of Price Signals into Land Use Planning," Urban/Regional, EconWPA 0410002, EconWPA.
  7. Grubbstrom, Robert W., 1995. "Modelling production opportunities -- an historical overview," International Journal of Production Economics, Elsevier, Elsevier, vol. 41(1-3), pages 1-14, October.
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Cited by:
  1. Maria Bruna Zolin & Lucia Luzi, 2013. "Unexpected and Growing Interest in Land Investments? The Asian Case," Working Papers, Department of Economics, University of Venice "Ca' Foscari" 2013:26, Department of Economics, University of Venice "Ca' Foscari".

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