Skip to main content

Advertisement

Log in

Accounting for Spatial Effects in Economic Models of Land Use: Recent Developments and Challenges Ahead

  • Published:
Environmental and Resource Economics Aims and scope Submit manuscript

Abstract

The marked increase in the availability of spatial data has forced researchers engaged in land use modeling to directly confront the question of space and the theoretical and methodological challenges involved in developing spatial models. Advances have come from multiple disciplines, most notably through the development and application of spatial theory and methods from regional science, geography, urban economics and more recently, theoretical and applied econometrics. The main goal of this paper is to summarize the econometric challenges of spatial data and to highlight spatial models and methods with a particular focus on models of land markets and land use change. We also discuss the data and modeling challenges associated with modeling the underlying spatial economic mechanisms that give rise to land use patterns and the complexities involved in modeling land use as a coupled economic-ecological system.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Similar content being viewed by others

References

  • Alig R (1986) Econometric analysis of the factors influencing forest acreage trends in the southeast. For Sci 32(1): 119–134

    Google Scholar 

  • Alig R, Healy RG (1987) Urban and built-up land area changes in the United States: an empirical investigation of determinants. Land Econ 63(3): 215–226

    Article  Google Scholar 

  • Anselin L (1988) Spatial econometrics: methods and models. Kluwer, Netherlands

    Google Scholar 

  • Anselin L (1996) Testing for spatial error autocorrelation in the presence of endogenous regressors. Int Reg Sci Rev 20(1/2): 153–182

    Google Scholar 

  • Anselin L (2001) Spatial econometrics. In: Baltagi B (ed) A companion to theoretical econometrics. Blackwell Publishing, Oxford

    Google Scholar 

  • Anselin L (2002) Under the hood issues in the specification and interpretation of spatial regression models. Agric Econ 27(3): 247–267

    Article  Google Scholar 

  • Anselin L (2007) Spatial econometrics in RSUE: retrospect and prospect. Reg Sci Urban Econ 37(4): 450–456

    Article  Google Scholar 

  • Anselin L (2010) Thirty years of spatial econometrics. Pap Reg Sci 89(1): 3–25

    Article  Google Scholar 

  • Anselin L, Bera A (1998) Spatial dependence in linear regression models with an introduction to spatial econometrics. In: Ullah A, Giles DE (eds) Handbook of applied economic statistics. Marcel Dekker, New York, pp 237–289

    Google Scholar 

  • Anselin L, Le Gallo J (2006) Interpolation of air quality measures in hedonic house price models: spatial aspects. Spatial Econ Anal 1(1): 31–52

    Article  Google Scholar 

  • Anselin L, Lozano-Gracia N (2009) Spatial hedonic models. In: Mills T, Patterson K (eds) Palgrave handbook of econometrics: volume 2, applied econometrics. Palgrave Macmillan, Basingstoke

    Google Scholar 

  • Anselin L, Moreno R (2003) Properties of tests for spatial error components. Reg Sci Urban Econ 33(5): 595–618

    Article  Google Scholar 

  • Arbia G, Fingleton B (2008) New spatial econometric techniques and applications in regional science. Pap Reg Sci 87(3): 311–317

    Article  Google Scholar 

  • Baltagi BH, Li D (2001) LM tests for functional form and spatial error correlation. Int Reg Sci Rev 25(2): 194–225

    Article  Google Scholar 

  • Banerjee S, Carlin BP, Gelfand AE (2004) Hierarchical modeling and analysis for spatial data. Monographs on Statistics and Applied Probability 101

  • Barnard CH, Whittaker G, Westenbarger D, Ahearn M (1997) Evidence of capitalization of direct government payments into US cropland values. Am J Agric Econ 79(5): 1642–1650

    Article  Google Scholar 

  • Bayer P, Keohane N, Timmins C (2009) Migration and hedonic valuation: the case of air quality. J Environ Econ Manage 58: 1–14

    Article  Google Scholar 

  • Bayer P, McMillan R, Murphy C, Timmins CA (2010) Dynamic model of demand for houses and neighborhoods. Manuscript

  • Bayer P, Timmins C (2007) Estimating equilibrium models of sorting across locations. Econ J 117: 353–374

    Article  Google Scholar 

  • Bell KP, Bockstael NE (2000) Applying the generalized-moments estimation approach to spatial problems involving microlevel data. Rev Econ Stat 82(1): 72–82

    Article  Google Scholar 

  • Bell KP, Dalton TJ (2007) Spatial economic analysis in data-rich environments. J Agric Econ 58(3): 487–501

    Article  Google Scholar 

  • Bento W, Towe C, Geoghegan J (2007) The effects of moratoria on residential development: evidence from a matching approach. Am J Agric Econ 89(5): 1211–1218

    Article  Google Scholar 

  • Bivand RS (2010) Spatial econometric functions in R. In: Handbook of applied spatial analysis, part 1, Springer, Berlin, pp 53–71

  • Black SE (1999) Do better schools matter? Parental valuation of elementary education. Q J Econ 114(2): 577–599

    Article  Google Scholar 

  • Bockstael N (1996) Modeling economics and ecology: the importance of a spatial perspective. Am J Agric Econ 78(5): 1168–1180

    Article  Google Scholar 

  • Brasington DM, Hite D (2005) Demand for environmental quality: a spatial hedonic analysis. Reg Sci Urban Econ 35: 57–82

    Article  Google Scholar 

  • Brueckner JK, Fansler DA (1983) The economics of urban sprawl: theory and evidence on the spatial sizes of cities. Rev Econ Stat 65(3): 479–482

    Article  Google Scholar 

  • Brown DG, Robinson DT, An L, Nassauer JI, Zellner M, Rand W et al (2008) Exurbia from the bottom-up: modeling multiple actors and their landscape interactions. Geoforum 39(2): 805–818

    Article  Google Scholar 

  • Burnham DB (1973) Markov intertemporal land use simulation model. South J Agric Econ 5(1): 253–258

    Google Scholar 

  • Can A (1992) Specification and estimation of hedonic housing price models. Reg Sci Urban Econ 22(3): 453–474

    Article  Google Scholar 

  • Case A (1991) Spatial patterns in household demand. Econometrica 59(4): 953–965

    Article  Google Scholar 

  • Case A (1992) Neighborhood influences and technological change. Reg Sci Urban Econ 22: 491–508

    Article  Google Scholar 

  • Cavailhès J, Brossard T, Foltête JC, Hilal M, Joly D, Tourneaux FP, Tritz C, Wavresky P (2010) GIS-based hedonic pricing of landscape. Environ Resour Econ 44(4): 571–590

    Article  Google Scholar 

  • Chakir R, Parent O (2009) Determinants of land use changes: a spatial multinomial probit approach. Pap Reg Sci 88: 327–344

    Article  Google Scholar 

  • Chen Y, Irwin EG, Jayaprpakash C (2010) Urban land development patterns with short run dynamics. Manuscript

  • Chen Y, Rosenthal SS (2008) Local amenities and life-cycle migration: do people move for jobs or fun?. J Urban Econ 64: 519–537

    Article  Google Scholar 

  • Cho S, Bowker J, Park W (2006) Measuring the contribution of water and green space amenities to housing values: An application and comparison of spatially weighted hedonic models. J Agric Resour Econ 31(3): 485–507

    Google Scholar 

  • Chomitz K, Gray D (1996) Roads, land use, and deforestation: a spatial model applied to Belize. World Bank Econ Rev 10(3): 487–512

    Google Scholar 

  • Conley TJ (1999) GMM estimation with cross sectional dependence. J Econ 92(1): 1–45

    Google Scholar 

  • Conley TJ, Udry CR (2010) Learning about a new technology: pineapple in Ghana. Am Econ Rev 100(1): 35–69

    Article  Google Scholar 

  • Cressie N (1993) Statistics for spatial data, revised edition. Wiley, New York

    Google Scholar 

  • Dubin RA (1988) Estimation of regression coefficients in the presence of spatially autocorrelated error terms. Rev Econ Stat 70(3): 466–474

    Article  Google Scholar 

  • Dubin RA (1992) Spatial autocorrelation and neighborhood quality. Reg Sci Urban Econ 22(3): 433–452

    Article  Google Scholar 

  • Elhorst JP (2003) Specification and estimation of spatial panel data models. Int Reg Sci Rev 26: 244–268

    Article  Google Scholar 

  • Elhorst JP (2010) Spatial panel data models. In: Handbook of applied spatial analysis part 3, Springer, Berlin, pp 377–407

  • Ellison G, Glaeser EL, Kerr WR (2010) What causes industry agglomeration? Evidence from coagglomeration patterns. Am Econ Rev 100(3): 1195–1213

    Article  Google Scholar 

  • Farber S, Yeates M (2006) A comparison of localized regression models in a hedonic house price context. Can J Reg Sci 29(3): 405–419

    Google Scholar 

  • Fleming M (2004) Techniques for estimating spatially dependent discrete choice models. In: Anselin L, Florax RJ, Rey SJ (eds) Advances in spatial econometrics. Springer, Heidelberg

    Google Scholar 

  • Filatova T, Parker DC, van der Veen A (2009) Land market interactions between heterogeneous agents in a heterogeneous landscape: Tracing the macro-scale effects of individual trade-offs between environmental amenities and disamenities. Can J Agric Econ-Revue Canadienne D Agroeconomie 57(4): 431–457

    Article  Google Scholar 

  • Florax RJGM, van der List AJ (2003) Spatial econometric data analysis: moving beyond traditional models. Int Reg Sci Rev 26(3): 223–243

    Article  Google Scholar 

  • Florax RJGM, Folmer H, Rey S (2004) A comment on specification searches in spatial econometrics: the relevance of Hendry’s methodology. Reg Sci Urban Econ 36(2): 300–308

    Article  Google Scholar 

  • Folmer H, Oud JH (2008) How to get rid of W: a latent variables approach to modeling spatially lagged variables. Environ Plann 40(10): 2526–2538

    Article  Google Scholar 

  • Fotheringham AS, Charlton M, Brunsdon C (1997) Measuring spatial variations in relationships with geographically weighted regression. In: Fischer MM, Getis A (eds) Recent developments in spatial analysis. Wiley, West Sussex, pp 60–82

    Google Scholar 

  • Fotheringham AS, Brunsdon C, Charlton M (2002) Geographically weighted regression: the analysis of spatially varying relationship. Wiley, West Sussex

    Google Scholar 

  • Geoghegan J, Wainger LA, Bockstael NE (1997) Spatial landscape indices in a hedonic framework: an ecological economics analysis using GIS. Eco Econ 23(3): 251–264

    Article  Google Scholar 

  • Hardie IW, Parks PJ (1997) Land use with heterogeneous land quality: an application of an area base model. Am J Agric Econ 79(2): 299–310

    Article  Google Scholar 

  • Heckman JJ, Ichimura H, Smith J, Todd PE (1998) Characterizing selection bias using experimental data. Econometrica 66(5): 1017–1098

    Article  Google Scholar 

  • Heckman JJ, Singer B (1982) The identification problem in econometric models for duration data. In: Hildebrand W (ed) Advances in econometrics. Cambridge University Press, Cambridge

    Google Scholar 

  • Hepple LW (2004) Bayesian model choice in spatial econometrics. In: LeSage JP, Pace RK (eds) Spatial and spatiotemporal econometrics. Elsevier, Oxford

    Google Scholar 

  • Herriges JA, Secchi S, Babcock BA (2005) Living with hogs in Iowa: the impact of livestock facilities on rural residential property values. Land Econ 81(4): 530–545

    Google Scholar 

  • Holloway G, LaCombe D, LeSage JP (2007) Spatial econometric issues for bio-economic and land-use modeling. J Agric Econ 58(3): 540–588

    Google Scholar 

  • Holloway G, Shankar B, Rahmanb S (2002) Bayesian spatial probit estimation: a primer and an application to HYV rice adoption. Agric Econ 37(3): 383–402

    Article  Google Scholar 

  • Hoshino T, Kuriyama K (2010) Measuring benefits of neighborhood park amenities: application and comparison of spatial hedonic approaches. Environ Resour Econ 45(3): 429–444

    Article  Google Scholar 

  • Irwin E, Bell K, Bockstael N, Newburn D, Partridge M, Wu JJ (2009) The economics of urban-rural space. Ann Rev Resour Econ 1: 151–1526

    Google Scholar 

  • Irwin E, Bockstael N (2002) Interacting agents, spatial externalities and the evolution of residential land use patterns. J Econ Geogra 2: 31–54

    Article  Google Scholar 

  • Kelejian HH, Prucha IR (1999) A generalized moments estimator for the autoregressive parameter in a spatial model. Int Econ Rev 40(2): 509–533

    Article  Google Scholar 

  • Kim CW, Phipps T, Anselin L (2003) Measuring the benefits of air quality improvement: a spatial hedonic approach. J Environ Econ Manage 45: 24–39

    Article  Google Scholar 

  • Kim J, Goldsmith P (2009) A spatial hedonic approach to assess the impact of swine production on residential property values. Environ Resour Econ 42(4): 509–534

    Article  Google Scholar 

  • Klaiber HA, Phaneuf DJ (2010) Valuing open space in a residential sorting model of the twin cities. J Environ Econ Manage 60(2): 57–77

    Article  Google Scholar 

  • Leggett CG, Bockstael NE (2000) Evidence of the effects of water quality on residential land prices. J Environ Econ Manage 39(2): 121–144

    Article  Google Scholar 

  • LeSage JP (1997) Bayesian estimation of spatial autoregressive models. Int Reg Sci Rev 20(1/2): 113–130

    Article  Google Scholar 

  • LeSage JP (2000) Bayesian estimation of limited dependent variable spatial autoregressive models. Geograp Anal 32: 19–35

    Article  Google Scholar 

  • LeSage JP (1999) Spatial econometrics. The Web Book of Regional Science, Regional Research Institute, West Virginia University, Morgantown

    Google Scholar 

  • Lewis DJ, Plantinga AJ, Nelson E, Polasky S (2010) The efficiency of voluntary incentive policies for preventing biodiversity loss. Resour Energy Econ. doi:10.1016/j.reseneeco.2010.04.012

    Google Scholar 

  • Lewis D, Plantinga AJ (2007) Policies for habitat fragmentation: combining econometrics with GIS-based landscape simulations. Land Econ 83(2): 109–127

    Google Scholar 

  • Lewis DJ, Plantinga AJ, Wu J (2009) Targeting incentives for habitat fragmentation. Am J Agric Econ 91(4): 1080–1098

    Article  Google Scholar 

  • Lichtenburg E (1989) Land quality, irrigation development, and cropping patterns in the Northern High Plains. Am J Agric Econ 71(1): 187–193

    Article  Google Scholar 

  • Lubowski RN, Plantinga AJ, Stavins RN (2006) Land-use change and carbon sinks: econometric estimation of the carbon sequestration supply function. J Environ Econ Manage 51(2): 135–152

    Article  Google Scholar 

  • Lynch L, Liu X (2007) Impact of designated preservation areas on rate of preservation and rate of conversion: preliminary evidence. Am J Agric Econ 89(5): 1205–1210

    Article  Google Scholar 

  • Magliocca N, McConnell V, Safirova E, Walls M (2009) An economic urban growth model with agent-based housing and land markets. Paper presented at the 56th meetings of the North American regional science association international, San Francisco, CA, November 19–21, 2009

  • Marshall A (1890) Principles of economics. Macmillan, London

    Google Scholar 

  • McMillen DP (1989) An empirical model of urban fringe land use. Land Econ 65(2): 138–145

    Article  Google Scholar 

  • McMillen DP (1992) Probit with spatial autocorrelation. J Reg Sci 32(3): 335–348

    Article  Google Scholar 

  • McMillen DP (2003) Neighborhood house price indexes in Chicago: a Fourier repeat sales approach. J Econ Geogra 3: 57–73

    Article  Google Scholar 

  • McMillen DP (2010) Issues in spatial data analysis. J Reg Sci 50(1): 119–141

    Article  Google Scholar 

  • McMillen DP, McDonald JF (1989) Selectivity bias in urban land value functions. Land Econ 65(4): 341–351

    Article  Google Scholar 

  • McMillen DP, McDonald JF (1991) Urban land value functions with endogenous zoning. J Urban Econ 29(1): 14–27

    Article  Google Scholar 

  • McMillen DP, McDonald JF (2002) Land values in a newly zoned city. Rev Econ Stat 84(1): 62–72

    Article  Google Scholar 

  • Munroe DK, Southworth J, Tucker CM (2002) The dynamics of land-cover change in western Honduras: exploring spatial and temporal complexity. Agric Econ 27(3): 355–369

    Article  Google Scholar 

  • Nelson G, Hellerstein D (1997) Do roads cause deforestation? Using satellite images in econometric analysis of land use. Am J Agric Econ 79(1): 80–88

    Article  Google Scholar 

  • Nelson E, Polasky S, Lewis DJ, Plantinga AJ, Lonsdorf E, White D, Bael D, Lawler J (2008) Efficiency of incentives to jointly increase carbon sequestration and species conservation on a landscape. Proc Nat Acad Sci 105(28): 9471–9476

    Article  Google Scholar 

  • Newburn D, Berck P (2006) Modeling suburban and rural-residential development beyond the urban fringe. Land Econ 82(4): 481–499

    Google Scholar 

  • Páez A (2009) Spatial analysis of economic systems and land use change. Pap Reg Sci 88: 251–258

    Article  Google Scholar 

  • Páez A, Long F, Farber S (2008) Moving window approaches for hedonic price estimation: an empirical comparison of modeling techniques. Urban Stud 45(8): 1565–1581

    Article  Google Scholar 

  • Pace RK, Barry R (1998) Spatial statistical toolbox 10 technical report. Lousiana State University, Baton Rouge

    Google Scholar 

  • Parker DC, Munroe DK (2007) The geography of market failure: edge-effect externalities and the location and production patterns of organic farming. Eco Econ 60: 821–833

    Article  Google Scholar 

  • Parker DC, Filatova T (2008) A conceptual design for a bilateral agent-based land market with heterogeneous economic agents. Comput Environ Urban Syst 32: 454–463

    Article  Google Scholar 

  • Parks PJ, Kramer RA (1995) A policy simulation of the wetlands reserve program. J Environ Econ Manage 28(2): 223

    Article  Google Scholar 

  • Pinkse J, Slade ME (1998) Contracting in space: an application of spatial statistics to discrete-choice models. J Econ 85(1): 125–154

    Google Scholar 

  • Pinkse J, Slade ME (2010) The future of spatial econometrics. J Reg Sci 50(1): 103–117

    Article  Google Scholar 

  • Plantinga A (1990) The effect of agricultural policies on land use and environmental quality. Am J Agric Econ 78(4): 1082–1091

    Article  Google Scholar 

  • Ready RC, Abdalla CW (2005) The amenity and disamenity impacts of agriculture: estimates from a hedonic pricing model. Am J Agric Econ 87(2): 314–326

    Article  Google Scholar 

  • Robertson RD, Nelson GC, De Pinto A (2009) Investigating the predictive capabilities of discrete choice models in the presence of spatial effects. Pap Reg Sci 88: 367–388

    Article  Google Scholar 

  • Robinson DT, Brown DG, Parker DC, Schreinemachers P, Janssen MA, Huigen M, Wittmer H, Gotts N, Promburom P, Irwin E, Berger T, Gatzweiler F, Barnaud C (2007) Comparison of empirical methods for building agent-based models in land use science. J Land Use Sci 2(1): 31–55

    Article  Google Scholar 

  • Rosenthal SS, Strange WC (2003) Geography, industrial organization, and agglomeration. Rev Econ Stat 85(2): 377–393

    Article  Google Scholar 

  • Schlenker W, Hanemann MW, Fisher AC (2007) Water availability, degree days, and the potential impact of climate change on irrigated agriculture in California. Climatic Change 81(1): 19–38

    Article  Google Scholar 

  • Schmidt L, Courant PN (2006) Sometimes close is good enough: the value of nearby environmental amenities. J Reg Sci 46: 931–950

    Article  Google Scholar 

  • Sieg H, Smith VK, Banzhaf S, Walsh R (2004) Estimating the general equilibrium benefits of large changes in spatially delineated public goods. Int Econ Rev 45(4): 1047–1077

    Article  Google Scholar 

  • Small KA, Steimetz S (2006) Spatial hedonics and the willingness to pay for residential amenities. Working Paper 05–06–31, University of California, Irvine, CA

  • Smith TE, LeSage JP (2004) A Bayesian probit model with spatial dependencies. In: LeSage JP, Pace RK (eds) Advances in econometrics: spatial and spatiotemporal econometrics. Elsevier Science, Oxford

    Google Scholar 

  • Smith M, Sanchirico J, Wilen J (2009) The economics of spatial-dynamic processes: Applications to renewable resources. J Environ Econ Manage 57: 104–121

    Article  Google Scholar 

  • Stavins RN, Jaffe AB (1990) Unintended impacts of public investments on private decisions: the depletion of forested wetlands. Am Econ Rev 80(3): 337–352

    Google Scholar 

  • Timmins C, Schlenker W (2009) Reduced-form versus structural modeling in environmental and resource economics. Ann Rev Resour Econ 1: 351–380

    Article  Google Scholar 

  • Tobler WR (1979) Smooth pycnophylactic interpolation for geographical regions. J Am Stat Assoc 74(367): 535–536

    Article  Google Scholar 

  • Viladecans-Marsal E (2004) Agglomeration economies and industrial location: city-level evidence. J Econ Geogra 4: 565–582

    Article  Google Scholar 

  • Walsh R (2007) Endogenous open space amenities in a locational equilibrium. J Urban Econ 61(2): 319–344

    Article  Google Scholar 

  • Wang X, Kockelman KM (2009) Application of the dynamic spatial ordered probit model: patterns of land development change in Austin, Texas. Pap Reg Sci 88: 345–365

    Article  Google Scholar 

  • White FC, Fleming FN (1980) An analysis of competing agricultural land uses. South J Agric Econ 12(4): 99–103

    Google Scholar 

  • Wu J, Segerson K (1995) The impact of policies and land characteristics on potential groundwater pollution in Wisconsin. Am J Agric Econ 77(4): 1033–1047

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Elena Irwin.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Brady, M., Irwin, E. Accounting for Spatial Effects in Economic Models of Land Use: Recent Developments and Challenges Ahead. Environ Resource Econ 48, 487–509 (2011). https://doi.org/10.1007/s10640-010-9446-6

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10640-010-9446-6

Keywords

Navigation