1. Analyzing the impact of soil contamination on farmland values Eloi Schreurs Sebastien Lizin Steven Van Passel Theo Thewys Summer school ‘Choice experiments in agricultural and food economics’ – Leuven (BE) – 3 rd July 2013

2. Master in economics PhD in environmental economics Hasselt University Eloi Schreurs Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 2

3. PhD topic Environmental pollution External cost Case study Campine region Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 3

4. 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) – 3 rd July 2013 Cd Zn As Cu 4

5. Problem statement Hedonic pricing analysis (HP) Y: Farmland values X: Soil Cd concentrations Result No effect Robust Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 5 Y = α + β 1 x 1 + β 2 x 2 + … + ε

6. Problem statement Why? Stated Preference (DCE) Objective Circumvent weaknesses HP Provide explanations Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 6

7. Design Simulate land purchase decision Select attribute(s) (levels)  Expert knowledge  Contact information  Co-operation Complementarity to HP Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 7

8. Design Attribute levels Little variability Extra consequences limited Based on HP dataset Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 AttributeLevel 1Level 2Level 3Level 4 Price (€/ha)15000250003500045000 Lot size (ha)0,51,52,53,5 Soil productivityLowRather lowRather highHigh Driving time to home (min)5101520 Distance to other farmland (m)075015002250 Land use restrictionsNo restrictions No arable crops and vegetables due to soil contamination 25% less usage of fertilizers Permanent pasture 8

9. Design Experimental design D-efficient design 3 options + opt-out 2 blocks of 8 choice sets Choice set Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 9 Option AOption BOption COption D Lot size0,5 ha1,5 ha2,5 ha Price per ha25000 €/ha15000 €/ha35000 €/ha ProductivityRather highHighRather lowI choose nor A, Distance to other farmland1500 m750 m2250 mnor B, Driving time to home15 min5 min20 minnor C Land use restrictionsNo restrictionsPermanent pasture 25% less usage of fertilizers ChoiceOOOO

10. Data Survey  In-person interview  26 municipalities  Simple random sampling Data (n = 200) Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 Socio-economic characteristics Sex Male95,5% Female4,5% Age <356,5% 35-4418% 45-5458% 55-6414% >653,5% Farm-level characteristics Professional Full time98% Part time2% Farming type Specialist milk56,5% Mixed farm20,5% Specialist pig10% Other specialist13% 10

11. CoefficientStd. Error Price-0.071**0.029 Lot size0.118***0.027 Low productivity-0.533***0.075 Rather low productivity-0.484***0.083 Rather high productivity-0.0730.084 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 N6400 Pseudo R²0.050 Results Multinomial logit model Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 11

12. CoefficientStd. Error Price-0.071**0.029 Lot size0.118***0.027 Low productivity-0.533***0.075 Rather low productivity-0.484***0.083 Rather high productivity-0.0730.084 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 N6400 Pseudo R²0.050 Results Other results Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 12

13. Results Willingness to pay Overestimation? Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 13 AttributeWTP (€/ha) Lot size (ha)16,619.72 Low productivity-75,070.42 Rather low productivity-68,169.01 Rather high productivity-10,281.69 Distance to other farmland (min)-10,760.56 Driving time to home (1000m)-1549.30 Soil contamination-46,197.18 Fertilizing restriction-77,464.79 Permanent pasture-52,253.52

14. Results Heterogeneity Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 14 CoefficientStd. Error Price-0.242**0.102 Lot size0.166***0.031 Low productivity-0.538***0.075 Rather low productivity-0.492***0.083 Rather high productivity-0.0830.084 Distance to other farmland-8.550E-05**4.350E-05 Driving time to home-0.011**0.005 Soil contamination-0.555***0.136 Fertilizing restriction-0.801***0.151 Permanent pasture-0.367***0.099 ASC4-1.388***0.200 Interaction effects Price - price estimation7.040E-06**3.050E-06 Price - risk takers-0.095**0.048 Lot size - food producers-0.137*0.079 Lot size – pig and poultry farms-0.221***0.072 Distance to other farmland – food producers-2.520E-04***9.780E-05 Distance to other farmland – expansive farms1.755E-04**8.230E-05 Soil contamination - specialist dairy farms0.376***0.144 Fertilizing restriction - agricultural education0.410**0.166 N6400 Pseudo R²0.067

15. Conclusion Soil 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) – 3 rd July 2013 15

16. Conclusion Farmer’s preferences Productivity Lot size Land use restrictions Further research External validity Valuation purposes? Private good – nonmarket/public good Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 16

17. Thank you for your attention Summer school Choice experiments - Leuven (BE) – 3 rd July 2013 17