Agricultural Land and the Small Parcel Size Premium Paradox

Abstract

The focus of this study is a greater understanding of the small parcel size premium in agricultural land. While this is a mostly new research direction, to the extent that land ownership is related to land use, the research is related to policy concerns about fragmentation of land use. Price per acre is inversely related to parcel size but all agricultural land is not sold in smaller parcels. One concern is whether parcel size has been increasing over time. If parcel size is increasing over time then parcels may become small enough that agricultural production is no longer a viable land use option. Additionally, where do small parcels occur? The hypothesis tested is that small parcels are more common around urban areas and that a small parcel premium can be found in or near urban areas. A semi-parametric regression is used to estimate the relationship between price per acre and parcel size. One hypothesis tested is that parcel size decreases as urban proximity increases. Also tested is whether or not parcel size is negatively correlated with proximity to an urban area.