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Spatial Spillovers in the Implicit Market Price of Soil Erosion: An Estimation using a Spatio-temporal Hedonic Model

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  • Caffera, Marcelo
  • Vásquez Lavín, Felipe
  • Rodríguez Anza, Daniel
  • Carrasco-Letelier, Leonidas
  • Hernández, José Ignacio
  • Buonomo, Mariela

Abstract

We estimate the implicit market price of soil erosion, fitting a spatio-temporal hedonic price model using quarterly data of 3,563 agricultural farms traded in Uruguay between 2000 and 2014. A unique feature of our estimation is that we allow for possible spatial spillovers. We find evidence of a negative and statistically significant association between erosion and land values. A 1% increase in own topsoil loss due to own erosion is associated with a decrease of 0.22% in the per-hectare price of agricultural land (p-value: 0.013, 95% CI: -0.0039, -0.0005). This is equivalent to a decrease of 7.7 USD in the average price per hectare and USD 1,040 in the price of the average farm (134 hectares). This value increases to USD 1,277 when we add the average cross marginal effect of erosion in nearby farms. Our estimates are sensitive to our measure of erosion and our specification of the spatio-temporal weighting matrix. We also find evidence consistent with our hypothesis that farms entering a governmental erosion control plan sent a valuable signal to the market regarding soil management. An indicator of whether the farm has at least one parcel under the government erosion control plans is associated with a 29% increase in the farm´s per-hectare price (p-value: 0.000, 95% CI: 16.26%, 41.53%) higher than those with no parcel under these plans. The average total marginal effect (own plus cross effects) of the erosion control plans is 35.37% (p-value: 0.000, 95% CI: 20.33%, 50.40%).

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  • Caffera, Marcelo & Vásquez Lavín, Felipe & Rodríguez Anza, Daniel & Carrasco-Letelier, Leonidas & Hernández, José Ignacio & Buonomo, Mariela, 2019. "Spatial Spillovers in the Implicit Market Price of Soil Erosion: An Estimation using a Spatio-temporal Hedonic Model," MPRA Paper 93589, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:93589
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    More about this item

    Keywords

    spatial spillovers; spatio-temporal hedonic model; soil erosion; farmland values; Uruguay;
    All these keywords.

    JEL classification:

    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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