Public Infrastructure Investment and the Market for Farmland

This CAE working paper considers the impact of public infrastructure investments on the market for farmland. Most public infrastructure is owned by state and local governments (86 percent) and supports urban activities. Public infrastructure investment has declined since 1970 and states and local governments have come to rely upon land-use exactions for funding Farmland value can be strongly influenced by infrastructure investments. Highway access increases the value of farmland if it signals conversion to urban uses. Water and/or sewer service also have a strong effect on farmland value, as do subjective expectations development. The authors test both land uses and the value of agricultural land using land parcels sold from 1979 to 1987 in McHenry County, Illinois, just north of the Chicago metropolitan area. Using a multinomial logit model to assess the probability that land is in agricultural, estate or residential use, land is more likely be farmed the further it is from the Chicago central business district, as well as its distance from the nearest town. The proportion of land used for rail lines increases the probability of agricultural use, while the proportion of land used for roads decreases it. The price per acre of agricultural land decreases with increases in parcel size and distance from the Chicago CBD. Shifts in public infrastructure investment from federal funds to land-use exactions will likely slow the rate of urban development [Note: Drs. McDonald's and Thorson's paper was presented as part of a CAE Symposium "Competition for the Land: A Workshop on Effects of Public Policy on the Market for U.S. Farmland." The entire Proceedings is also available from CAE.]

John F. McDonald, James A. Thorson
DeKalb, IL: American Farmland Trust
Page Numbers: 
Publication Date: 
May 1, 1997
Literature Category: 
Reports and Studies