The Land Market: A Spatial Economic Perspective

Land markets are the subject of political debate in many countries where discussions focus on themes such as externalities, urban growth and the role of land speculation. Examples of negative externalities can be found in agriculture where the use of pesticides can reduce biodiversity and downgrade the quality of nature areas. Other examples include industries that cause pollution in nearby residential areas or the construction of new residential areas that diminish the amount of open space for existing residents. Open space is becoming increasingly important in many densely populated areas as prosperity increases. As a result, the valuation of open space has started to become a research topic among economists. Spatial patterns of urban development have been another important theme in the political debate about land markets for several decades. A related issue is the relationship between accessibility, transport infrastructure projects and land values. Another area of political debate involves the allocation of ownership titles and the role of speculators, particularly where markets are booming. Market forces play an important role in all these phenomena but, depending on the institutional arrangements in place in any one country, the involvement of governments is also critically important. An economic analysis of both market forces and government intervention in the land market will help improve our understanding of these issues.