Analyzing the impact of soil contamination on farmland valuesEloi SchreursSebastien LizinSteven Van PasselTheo Thewys

Summer school ‘Choice experiments in agricultural and food economics’ – Leuven (BE) – 3rd July 2013

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Master in economicsPhD in environmental economicsHasselt University

Eloi Schreurs

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

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PhD topicEnvironmental pollutionExternal cost

Case studyCampine region

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

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Contamination of farmland

Food safety?Health risks?

Uncertainty?

Soil remediation?Land use restrictions?

“Impact soil pollution on farmland values?”

Problem statement

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

Cd

Zn AsCu

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Problem statementHedonic pricing analysis (HP)

Y: Farmland values X: Soil Cd concentrations

ResultNo effectRobust

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

Y = α + β1x1 + β2x2 + … + ε

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Problem statement

Why?

Stated Preference (DCE) Objective

Circumvent weaknesses HPProvide explanations

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

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DesignSimulate land purchase decision

Select attribute(s) (levels)

Expert knowledge Contact information Co-operation

Complementarity to HP

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

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DesignAttribute levels

Little variabilityExtra consequences limited

Based on HP dataset

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

Attribute Level 1 Level 2 Level 3 Level 4Price (€/ha) 15000 25000 35000 45000Lot size (ha) 0,5 1,5 2,5 3,5Soil productivity Low Rather low Rather high HighDriving time to home (min) 5 10 15 20Distance to other farmland (m) 0 750 1500 2250

Land use restrictions No restrictions

No arable crops and vegetables due to soil contamination

25% less usage of fertilizers

Permanent pasture

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DesignExperimental design

D-efficient design3 options + opt-out2 blocks of 8 choice sets

Choice set

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

  Option A Option B Option C Option DLot size 0,5 ha 1,5 ha 2,5 ha Price per ha 25000 €/ha 15000 €/ha 35000 €/ha Productivity Rather high High Rather low I choose nor A,Distance to other farmland 1500 m 750 m 2250 m nor B,Driving time to home 15 min 5 min 20 min nor C

Land use restrictions No restrictions Permanent pasture 25% less usage of fertilizers

Choice O O O O

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DataSurvey

In-person interview 26 municipalities Simple random sampling

Data (n = 200)

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

Socio-economic characteristics

SexMale 95,5%Female 4,5%

Age

<35 6,5%35-44 18%45-54 58%55-64 14%>65 3,5%

Farm-level characteristics

ProfessionalFull time 98%Part time 2%

Farming type

Specialist milk 56,5%Mixed farm 20,5%Specialist pig 10%Other specialist 13%

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Coefficient Std. Error

Price -0.071** 0.029

Lot size 0.118*** 0.027

Low productivity -0.533*** 0.075

Rather low productivity -0.484*** 0.083

Rather high productivity -0.073 0.084

Distance to other farmland -7.640E-05** 3.440E-05

Driving time to home -0.011** 0.005

Soil contamination -0.328*** 0.087

Fertilizing restriction -0.550*** 0.104

Permanent pasture -0.371*** 0.099

ASC -1.333*** 0.197

N 6400  

Pseudo R² 0.050  

ResultsMultinomial logit model

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

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Coefficient Std. Error

Price -0.071** 0.029Lot size 0.118*** 0.027Low productivity -0.533*** 0.075Rather low productivity -0.484*** 0.083Rather high productivity -0.073 0.084Distance to other farmland -7.640E-05** 3.440E-05Driving time to home -0.011** 0.005Soil contamination -0.328*** 0.087Fertilizing restriction -0.550*** 0.104Permanent pasture -0.371*** 0.099ASC -1.333*** 0.197N 6400  Pseudo R² 0.050  

ResultsOther results

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

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ResultsWillingness to pay

Overestimation?

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

Attribute WTP (€/ha)Lot size (ha) 16,619.72Low productivity -75,070.42Rather low productivity -68,169.01Rather high productivity -10,281.69Distance to other farmland (min) -10,760.56Driving time to home (1000m) -1549.30Soil contamination -46,197.18Fertilizing restriction -77,464.79Permanent pasture -52,253.52

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ResultsHeterogeneity

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

Coefficient Std. ErrorPrice -0.242** 0.102Lot size 0.166*** 0.031Low productivity -0.538*** 0.075Rather low productivity -0.492*** 0.083Rather high productivity -0.083 0.084Distance to other farmland -8.550E-05** 4.350E-05Driving time to home -0.011** 0.005Soil contamination -0.555*** 0.136Fertilizing restriction -0.801*** 0.151Permanent pasture -0.367*** 0.099ASC4 -1.388*** 0.200Interaction effects    Price - price estimation 7.040E-06** 3.050E-06Price - risk takers -0.095** 0.048Lot size - food producers -0.137* 0.079Lot size – pig and poultry farms -0.221*** 0.072Distance to other farmland – food producers -2.520E-04*** 9.780E-05Distance to other farmland – expansive farms 1.755E-04** 8.230E-05Soil contamination - specialist dairy farms 0.376*** 0.144Fertilizing restriction - agricultural education 0.410** 0.166N 6400  Pseudo R² 0.067  

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ConclusionSoil contamination =

important in farmer’s land perception

Confirm explanations Lack of awareness Lack of compliance Specialist dairy farmers

Other possibilities Non-farmers in HP Farmland scarcity

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

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ConclusionFarmer’s preferences

ProductivityLot sizeLand use restrictions

Further researchExternal validityValuation purposes?Private good – nonmarket/public good

Summer school Choice experiments - Leuven (BE) – 3rd July 2013

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Thank you for your attention

Summer school Choice experiments - Leuven (BE) – 3rd July 2013