The fundamentals of land prices and urban growth

Article Abstract:

A dynamic model is proposed to test the theory of intra-urban location and land use concerning the effects of urban growth and decline on land price. Research results indicate that the determination of urban land value has four additive components: agricultural land rent value; conversion costs; the value of accessibility; and a growth premium from anticipated rent increases. Based on the model, which assumes capital is durable and that landowners possess perfect foresight, the growth premium can account for half of the price of land in rapidly growing urban areas. The premium also can create a large gap between land located at the boundary of a city and the value of the rent from agricultural land.

Prices and rates, Real estate, Economic development, Real estate development, Real property

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The stochastic city

Article Abstract:

The impact of uncertainty on equilibrium land rents and prices was investigated in a stochastic model of an expanding urban region. Uncertainty influenced both rents and prices, but growth influenced land prices without affecting rents. The effects of uncertainty included a delay in converting land use from agricultural to urban purposes, a placement of option value on agricultural land, an increase in the price of land at the boundary to a level greater than its opportunity cost in other uses, and a reduction in equilibrium city size.

Cities and towns, Growth, Stochastic processes, Uncertainty

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Knowledge and production in the CBD

Article Abstract:

A model of knowledge and production in central business districts (CBD) is presented. The model demonstrates that unique maxima are achieved by output and factor intensities at the CBD's center if distance reduces the amount of shared knowledge, and intensities decrease as the distance from the CBD increases. The model also shows that productivity differs by location and increases as the size of the CBD increases in equilibrium.

Production functions (Economics), Central business districts

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