Environmental Economics

Ecosystem Valuation: Policy Applications for the Patuxent Watershed Ecological-Economics Model

  • Abstract
    In this proposed research the Principle Investigator will develop and analyze a number of proposed government policies and measure their economic and ecological costs and benefits using the joint Ecological Economics Patuxent Watershed Model presently under development at the University of Maryland by the Department of Agricultural and Resource Economics and the Chesapeake Biological Lab. This linked ecological and economic model makes possible inquiry into issues of ecosystem valuation, by first determining the interplay and feedbacks between ecological and economic systems. The subcontract to the University of Maryland will enable the PI to continue working with the economists and ecologists there for further modeling improvements and linkages. These improvements include further development with the economists of a hedonic pricing model to perform welfare analysis and ecosystem valuation. The PI will also continue working with the ecologist to design ecosystem health indices to be able to more fully link and utilize the ecological and economic models for policy analysis. The policies that will be analyzed include the use of zoning and other land use controls, as well as riparian forest buffers to control nonpoint source pollution into ground and surface water and habitat health and diversity in the Watershed; investigate aspects of the regulatory "takings" issues in regard to a number of potential government environmental policies; and investigate the role and function of wetlands in both ecological and economic terms, to be able to augment benefit cost analysis of regulatory action regarding wetlands.
  • Metadata
    Principal Investigators:
    Geoghegan, Jacqueline
    Technical Liaison:
    Research Organization:
    Clark University
    Funding Agency/Program:
    Grant Year:
    Project Period:
    January 1, 1997 - December 31, 1998
    Cost to Funding Agency:
  • Project Reports

    This grant has continued support for the Patuxent Watershed (Maryland) economics land use modeling project based at the Department of Agricultural and Resource Economics at the University of Maryland. This large project is unique in that it is the most spatially explicit and disaggregated model of individual human behavior that currently merges spatial data and geographic information systems (GIS) in economic modeling. Specifically, this grant funds research to further develop spatially-explicit economic models of land values and human-induced land use change, and to use these models for an assortment of policy analyses. This contribution has been a number of significant items, through data collection and creation, conceptualization, and development of pertinent policy questions, as well as through completion of analyses. During the course of this grant, questions concerning sprawl have become one of the most important and also a contentious issue in land use policy in the United States. In response to this interest, the major portion of this research has focused on developing models of residential sprawl development and creation of the dataset necessary for the analysis. We have focused specifically on the development of a unique database to create dynamic spatially explicit land use change models to model the interactions between land use change decisions and zoning regulations and other land use controls.

    This project has consisted of developing economic land value and land use change models of the counties of the Patuxent Watershed in southern Maryland, one of the nine river basins of the Chesapeake Watershed and covering approximately 1,000 square miles. This area includes seven counties: Anne Arundel, Calvert, Charles, Montgomery, Howard, Prince George's, and St. Mary's. The intent of the research has been to increase our understanding of, and our ability to model at a spatially disaggregate individual parcel level, the spatial configuration and dynamic evolution of the urban fringe landscape. With this understanding, the effect of differing regulatory environments will be more predictable, leading to improved methods for valuing landscape configurations and a greater ability to assess the benefits and costs of regulatory consequences.


    A number of elements from our initial modeling results are interesting and have potential policy ramifications. First, we find that the nature and pattern of the land uses surrounding a parcel have an influence on the price, implying that people care very much about the patterns of landscape around them. This supports the belief that there can be severe externalities in land use and in land use patterns. A second result of some significance is that the marginal value of increasing lot size appears to decline rather rapidly, implying that minimum lot size zoning has a considerable effect on the value of an undeveloped parcel of land. A third result is the strong influence distance to employment centers (and therefore roads) has on property values. Finally, we note that the effect on price of many features of the landscape is different depending on whether the parcel is in a highly developed area, a suburban area, or a relatively rural area.

    We also have found that the value of a parcel in residential land use is affected by the pattern of surrounding land uses, not just specific features of point locations. Beyond the traditional explanatory variables described above, we also have created variables of measures of open space, diversity, and fragmentation of land uses around each observation. Estimation has demonstrated that these additional GIS-created variables, measured at different scales, can add explanatory power to a hedonic model of housing values. Initial results from other ongoing research have shown that individuals are willing to pay higher residential prices to be nearby open space, and are willing to pay an even higher premium to be near permanent open space.

    In other related research, we have developed a theoretical model of pollution in a spatial Hotelling model, and tested the implications that areas closer to the border of a land use planning area are more likely to be zoned "dirty" (i.e., industrial). The results of the theoretical model show that the pollution cost is minimized when the firm locates close to or at the downstream end of the market irrespective of the shape of the consumer distribution or the value of any other parameters. The total social cost in the presence of the externality can be minimized by locating the polluting firm close to the downstream end of the market for certain combinations of the parameters. We test this hypothesis concerning the spatial location of industrial zoning using a probit model for seven counties of the Patuxent Watershed. We find that the locations of industrial zones are more likely, relative to other "clean" (i.e., residential) zones, to be nearer the county boundary, supporting our theoretical hypothesis. We also find that as transportation costs increase, parcel being near waterfront decreases the probability of an area being zoned industrial, as does an increase in population density.

    Publications and Presentations: Total Count: 27

    Leggett CG, Bockstael NE. Evidence of the effects of water quality on residential land prices. Journal of Environmental Economics and Management 2000;39(2):121-144.

    Geoghegan J, Wainger L, Bockstael N. Spatial landscape indices in a hedonic framework: an ecological economics analysis using GIS. Ecological Economics, Volume 23, Issue 3, 5 December 1997, Pages 251-264.

    Geoghegan J. Spatially explicit analysis. International Encyclopedia of the Social and Behavioral Sciences (to be published in 2001).

    Nickerson CJ, Lynch L. The effect of farmland preservation programs on farmland prices. American Journal of Agricultural Economics 2000 (to be published).

    Irwin EG, Geoghegan J. Theory, data, methods: developing spatially-explicit economic models of land use change. Agriculture, Ecosystems, and Environment 2000 (in review).

    Geoghegan J, Bockstael NE. A spatially explicit econometric model of land use change: suburbanization of the Patuxent watershed, Maryland, USA. Presented at The Earth's Changing Land: GCTE-LUCC Open Science Conference on Global Change, Barcelona, Spain, March 1998.

    Johnson LC. Economic causes of wetlands losses. Presented at the Eastern Economics Association Conference, Washington, DC, 2000.

    Geoghegan J. Land use change and water quality: implications for the Patuxent watershed, Maryland. Presented at the University of Rhode Island Partnership for the Coastal Environment, Kingston, RI, November 1998.

    Geoghegan J. Land values in a spatial hedonic model. Presented at the Center for Energy and Environmental Studies, Boston University, Boston, MA, April 1998.

    Lynch L, Brown C. Landowner decision making about riparian buffers. Presented at the University of Maryland, 2000.

    Johnson LC. Management of freshwater wetlands in the context of global environmental change. Presented at Clark University, 1997.

    Geoghegan J. Modeling LUCC in the Patuxent watershed, USA. Presented at the Open Meeting of the Human Dimensions of Global Environmental Change Research Community, International Institute for Applied Systems Analysis, Laxenburg, Austria, June 1997.

    Geoghegan J. Policy application for the Patuxent watershed ecological-economic model. Presented at the Decision-Making and Valuation for Environmental Policy Workshop, National Science Foundation and U.S. Environmental Protection Agency, Washington DC, April 2-3, 1998.

    Bockstael NE, Geoghegan J. Smart growth and the supply of sprawl. Paper to be presented at the Association of Environmental and Resource Economists Annual Workshop, La Jolla, CA, June 2000.

    Geoghegan J, Pritchard L, Jr, Ogneva-Himmelberger Y, Chowdhury RR, Sanderson S, Turner BL, II. Socializing the pixel, and pixelizing the social in land-use and land-cover change. In: Liverman D, Moran E, Rindfuss R, Stern P, eds. People and Pixels: Linking Remote Sensing and Social Science. Committee on the Human Dimensions of Global Environmental Change, National Research Council, Washington, DC, National Academy of Science Press, 1998, pp. 51-69.

    Geoghegan J. Socio-economic data needs associated with SYPR and Patuxent LUCC projects. Presented at the LUCC Data Gathering and Compilation Workshop, Barcelona, Spain, November 1998.

    Geoghegan J. Spatial modeling in land use change. Presented at the Second Meeting of The Center for Integrated Study of the Human Dimensions of Global Change, Carnegie Mellon University, Pittsburgh, PA, June 1997.

    Geoghegan J. Spatially explicit land use change models: linking social and natural sciences. Presented at the American Association for the Advancement of Science Annual Meeting, Anaheim, CA, January 1999.

    Geoghegan J. The Patuxent ecological-economic model. Presented at the Human Dimensions of Deforestation and Regrowth in the Brazilian Amazon, University of Florida and University of New Hampshire, Marathon, FL, February 1997.

    Geoghegan J. The value of open spaces in residential land prices. Presented to the American Agricultural Economics Association, Salt Lake City, UT, 1998.

    Geoghegan J. The value of open spaces in residential land prices and land use change. Presented at the Department of Resource Economics and Policy Research Seminar, University of Maine, Orono, ME, October 1997.

    Irwin EG, Geoghegan J. Theory, data, methods: developing spatially-explicit economic models of land-use change. Presented at the Current Progress in Quantifying Spatially Explicit Causes and Effects of Land-Use/Cover Change: Examples From Different Parts of the World Session, Wageningen, The Netherlands, December 1999.

    Johnson LC. Wetland mitigation banking: a market measure for land use control. Presented at the Management of freshwater wetlands in the context of global environmental change. Presented at the Clark University Multidisciplinary Conference, Worcester, MA, 2000.

    Geoghegan J. Invited participant in the U.S. Environmental Protection Agency Mid-Atlantic Land Use Modeling Workshop, Towson, MD, February 1998.

    Geoghegan J. Invited participant in the USGS EROS Data Center and the National Center for Geographic Information and Analysis' Land Use Modeling Workshop, Sioux Falls, SD, June 1997.

    Geoghegan J. Rural land use: public preferences for open space and implications for policy design. Invited participant in the U.S. Department of Agriculture, Economic Research Service Workshop, Washington, DC, December 1998.

    Geoghegan J. Status and trends in spatial analysis. Invited participant in National Center for Geographic Information and Analysis, University of California, Santa Barbara Workshop, Santa Barbara, CA, December 1998.

  • Project Status Reports

    From Proceedings of April 2-3, 1998 Workshop:

    The spatial distribution of land-use/land cover change (LUCC) as a cause of other environmental change is well documented in the natural sciences. The spatial modeling of anthropocentric land-use change within the domain of the social sciences, especially economics, has been much more limited. Although it is true that two of the major LUCC categories: urbaniza- tion and tropical deforestation, have been extensively studied by economists, these are rarely spatially dissag- gregated or spatially explicit. LUCC is a spatial process and must be modeled as such. To explain and predict LUCC, models must be developed to address where, when, and why LUCC happens.

    This project extends work begun under an Envi-ronmental Protection Agency cooperative agreement in which a preliminary spatial econometric model of land-use change was developed for the Patuxent Watershed in Maryland that focuses on the large majority of land-use changes in the study region: open uses (forestry and agricultural) to residential uses. The first extension to the original spatially explicit hedonic model of residential land values is to include detailed infor- mation on the different types of open space around a residential land parcel, in addition to location and other attributes of the parcel. Two types of open space are included: publicly owned parks and privately owned forest land as well as agricultural land.

    The investigators hypothesize that individuals will value these “permanent” open spaces differently than “developable” open spaces in their valuation of residential land. Preliminary results show that homeowners are willing to pay a premium to live near permanent open space. This estimated hedonic model is then used to create predicted spatial maps of value of undeveloped land if it was to be put in residential use, given the existing set of the natural, human, and regulatory landscape.

    The second stage of modeling and the second research innovation currently under way involve esti- mating a duration model of historical land-use conver- sion decisions. In this stage, historical decisions of land-use change are modeled as functions of the expected returns and expected costs at each point in time from the conversion of land-use from agricultural and forestry uses to residential development. These expectations will be a function of the value in original use, predicted value in residential use (derived above), and costs of conversion, which include regulatory costs.

    Once the parameters of these two stages of the model are estimated, the model is used to generate the relative probabilities of conversion of different devel- opable parcels in the landscape. A spatial pattern of relative development pressure is obtained as a function of characteristics of the parcels and their locations.

    Because the explanatory variables used to predict the values in residential and alternative uses and the costs of conversion are all functions of ecological fea- tures, human infrastructure, and government policies, the effects of changes in any of these variables on land-use change can be simulated.

    From Previous status report:
    Objective of Research:

    This grant continues support for a research project that is the first comprehensive work in economic modeling that makes use of spatial data. Specifically, this grant funds research to further develop the Patuxent Watershed economic model of land use and land use change for use in policy analysis.

    Progress Summary:

    Data development has included creating a dynamic spatial database of land use change decisions, as well as increasing our spatial data layers such as historic zoning information and more detailed information on locally undesirable land uses. New spatial hedonic models of residential land values have been developed that focus on the contribution of the value to residential land values of different forms of open space in the neighborhood of a land parcel. Progress has also been made on developing new econometric models of land use change using a duration modeling approach for estimation.

    Accomplishments and Research Results:

    Creation of a unique spatially dissaggregate database on dynamic land use decisions. Econometric results on residential land values that demonstrate that individuals value the contribution of open spaces in their neighborhood differently when they are purchasing residential land. "Private" open space (such as agricultural and forestry land uses) are not as highly valued as permanent open space (park lands).


    " Socializing the Pixel' and Pixelizing the Social' with Scalar Dynamic in Land-Use/Cover Change." Jacqueline Geoghegan, Lowell Pritchard, Jr., Yelena Ogneva-Himmelberger, Rinku Roy Chowdhury, Steven Sanderson, and B. L. Turner II. In Peoples and Pixels: Linking Remote Sensing and Social Science. Committee on the Human Dimensions of Global Environmental Change, National Research Council. 1998, forthcoming.

    "Spatial Landscape Indices in a Hedonic Framework: An Ecological Economics Analysis Using GIS." Jacqueline Geoghegan, Lisa Wainger, and Nancy Bockstael. Ecological Economics, Vol. 23, No.3, 1997.

    "The Economics of Land-Use Change in the Patuxent Watershed." Jacqueline Geoghegan, Nancy Bockstael, and Douglas Lipton. In Land Use and Management in Maryland. ed. Earl Brown and Cindy Buniski. The Aspen Institute and the Center for Agricultural and Natural Resource Policy, University of Maryland, College Park, 1997.

    "Human Behavior and Ecosystem Valuation: An Application to the Patuxent Watershed of the Chesapeake Bay." Jacqueline Geoghegan and Nancy Bockstael. In Human Activities and Ecosystem Function: Reconciling Economics and Ecology. ed. David Simpson and Norman Christensen. Chapman & Hall: New York, 1997.

    "Modeling LUCC in the Patuxent Watershed, USA." Jacqueline Geoghegan. Presentation at the 1997 Open Meeting of the Human Dimensions of Global Environmental Change Research Community, International Institute for Applied Systems Analysis, Laxenburg, Austria June 12-14, 1997.

    "The Value of Open Spaces in Residential Land Prices and Land Use Change," Paper presented to Department of Resource Economics and Policy Research Seminar, University of Maine, Orono, ME, October, 1997.

    Invited participant in USGS EROS Data Center and the National Center for Geographic Information and Analysis's Land Use Modeling Workshop. Sioux Falls, South Dakota, June, 1997.

    "The Patuxent Ecological-Economic Model." Jacqueline Geoghegan. Workshop: Human Dimensions of Deforestation and Regrowth in the Brazilian Amazon. Sponsored by University of Florida and University of New Hampshire. Marathon, Florida, February, 1997.

    Future Activities:

    Modeling advances on endogenous zoning, linking land use model with simulation model of the benefits and costs of riparian forest buffers, impact of locally undesirable land uses on land values and land use change.