Market thinness, income sorting and leapfrog development across the urban-rural gradient

This paper investigates the conditions under which thin residential land markets generate an incentive for leapfrog development. We provide empirical evidence that suggests the presence of thinly traded land market in exurban areas. We develop a spatial model of an exurban land market that incorpora...

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Bibliographic Details
Published in:Regional science and urban economics 2017-09, Vol.66, p.213-223
Main Authors: Chen, Yong, Irwin, Elena G., Jayaprakash, Ciriyam, Irwin, Nicholas B.
Format: Article
Language:English
Subjects:
Auction
C63
High income
Households
Housing developments
Housing market
Housing markets
Incentives
income
Land
Land market
land markets
Land prices
Property values
R14
R31
residential areas
Residential development
Residential land use
Rural communities
Rural development
Studies
Thin market
Thinness
urban economics
Urban sprawl
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Summary:This paper investigates the conditions under which thin residential land markets generate an incentive for leapfrog development. We provide empirical evidence that suggests the presence of thinly traded land market in exurban areas. We develop a spatial model of an exurban land market that incorporates this key feature and show the conditions under which leapfrog development emerges. Specifically, given increasing market thinness with distance and a limited number of heterogeneous buyers, higher income households are able to bid down land prices at farther away locations. This creates an incentive for leapfrog development and leads to a positive income gradient, which we also confirm empirically. •Leapfrog development can arise from thinly traded rural land market.•Develops a structural model on land use change for thinly traded land market.•Provides empirical evidence suggesting the existence of thinly traded land market.
ISSN:0166-0462
1879-2308
DOI:10.1016/j.regsciurbeco.2017.07.001