《The Structure of Urban Land Prices》.pdf

JOURNAL OF URBAN ECONOMICS 41, 321 336 1997 ARTICLE NO. UE962000 The Structure of Urban Land Prices* Peter F. Colwell Uniersity of Illinois at Urbana Champaign, 1407 W. Gregory Drie, Urbana, Illinois 61801 and Henry J. Munneke Uniersity of Georgia, Terry College of Business, 206 Brooks Hall, Athens, Georgia 30602-6255 Received May 26, 1994; revised November 10, 1995 Recognition of the existence of nonlinear land prices has an impact on the measurement of the rate at which land price declines with distance from the urban center. It is hypothesized that concave parcel prices have given rise to overly large estimates of the rate of price decline with distance, because parcel sizes increase with distance and increased parcel sizes would be associated with lower unit prices as a result of the concavity of the land price function. This hypothesis is empirically tested using vacant residential, commercial, and industrial land sales from within Cook County, Illinois. An important finding is that allowing for concavity greatly reduces, although it does not eliminate, measured rates of price decline with distance. 1997 Academic Press There is a substantial literature that supports the idea that urban land prices are nonlinear. Specifically, land price appears to be an increasing, concave function of parcel size. The most recent rediscovery of this phenomenon appears in Brownstone and DeVany