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

Presenta Marcelo Caffera (Universidad de Montevideo) en coautoría F. Vásquez; D. Rodríguez; L. Carrasco; J. Hernández; M. Buonomo

Abstract  

We estimate the implicit market price of soil erosion, fitting a 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. 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%) compared to those with no parcel under these plans. The average total effect (own plus cross effects) of the erosion control plans is 35.37% (p-value: 0.000, 95% CI: 20.33%, 50.40%).