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Journal of Economic Geography 2:31-54 (2002)
Copyright © 2002 Oxford University Press

Article

Interacting agents, spatial externalities and the evolution of residential land use patterns

Elena G. Irwin* and Nancy E. Bockstael**

*Department of Agricultural, Environmental, and Development Economics, Ohio State University, 2120 Fyffe Rd, Columbus, OH 43210, USA. email <irwin.78{at}osu.edu>
**Department of Agricultural and Resource Economics, University of Maryland, 2100 Symons Hall, College Park, MD 20740, USA. email <nancyb{at}arec.umd.edu>

Abstract

We develop a model of land use conversion that incorporates local spillover effects among spatially distributed agents. The model is used to test the hypothesis that fragmented patterns of development in rural-urban fringe areas could be due to negative externalities that create a ‘repelling’ effect among residential land parcels. Identification of the hypothesized interaction effect is complicated by unobserved, spatially correlated heterogeneity. Using an identification strategy that bounds the interaction effect from above, we find empirical evidence that is consistent with a theory of negative interactions among recently developed residential subdivisions in exurban Maryland. The result offers an alternative explanation for low density sprawl to that which is frequently posited in the economics literature and one with potentially quite different efficiency implications.

Keywords: land use pattern, spatial externalities, interactions-based models, sprawl

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