MK. LANDUSE PLANNING & LEND DEVELOPMENT
LAND USE ECONOMICS :
Land Rents, Accessibility
and Urban Form
smno.pdip.ppsfpub.nop2013
EKONOMI LAHAN
In economics, land comprises all naturally occurring resources whose supply is inherently
fixed. Examples are any and all particular geographical locations, mineral deposits, and
even geostationary orbit locations and portions of the electromagnetic spectrum.
Natural resources are fundamental to the production of all goods, including capital goods.
Location values must not be confused with values imparted by fixed capital improvements.
In classical economics, land is considered one of the three factors of production (along with
capital, and labor). In some cases, land may be merged with capital due to the relatively
small importance that land has in industrial and service sectors. Income derived from
ownership or control of natural resources is referred to as rent.
Land was sometimes defined in classical and neoclassical economics as the "original and
indestructible powers of the soil.
Georgists hold that this implies a perfectly inelastic supply curve (i.e., zero elasticity),
suggesting that a land value tax that recovers the rent of land for public purposes would not
affect the opportunity cost of using land, but would instead only decrease the value of
owning it. This view is supported by evidence that although land can come on and off the
market, market inventories of land show if anything an inverse relationship to price (i.e.,
negative elasticity).
As a tangible asset land is represented in accounting as a fixed asset or a capital asset.
Sumber: http://en.wikipedia.org/wiki/Land_%28economics%29 ……………….. 2/3/2013
LAHAN: FAKTOR PRODUKSI
In economics, factors of production are the inputs to the production process.
Finished goods are the output.
Input determines the quantity of output i.e. output depends upon input. Input is the starting
point and output is the end point of production process and such input-output relationship
is called a production function.
All factors of production like land, labor, capital and technology are required in
combination at a time to produce a commodity. In economics, production means creation or
an addition of utility. Factors of production (or productive 'inputs' or 'resources') are any
commodities or services used to produce goods or services
'Factors of production' may also refer specifically to the 'primary factors', which are stocks
including land, labor (the ability to work), and capital goods applied to production.
Materials and energy are considered secondary factors in classical economics because they
are obtained from land, labor and capital. The primary factors facilitate production but
neither become part of the product (as with raw materials) nor become significantly
transformed by the production process (as with fuel used to power machinery).
'Land' includes not only the site of production but natural resources above or below the
soil. The factor land may, however, for simplification purposes be merged with capital in
some cases (due to land being of little importance in the service sector and manufacturing).
Sumber: http://en.wikipedia.org/wiki/Factors_of_production……………….. 2/3/2013
RENTE EKONOMI = SEWA EKONOMI
In economics, Economic rent typically describes the difference between the
amount paid for the inputs to a production process and the amount that would be
paid for those inputs assuming a unitary (or greater) elasticity of supply.
Economic rent (which in production analysis is always seen as a cost
of inputs) is affected by any production only minimally, if at all.
Economic rent is a fact of natural or contrived exclusivity. For labor, economic
rent could be created by the existence of guilds or labor unions (e.g. higher pay for
workers, where political action creates a scarcity of such workers); for a produced
commodity, economic rent may also be due to the legal ownership of a patent (a
politically enforced right to the use of a process or ingredient); for operating
licenses, it is the cost of permits and licenses that are politically controlled as to
their number of licenses regardless of competence and willingness of those who
wish to compete in the area being licensed; for most other production including
agriculture, economic rent is due to natural scarcity.
When economic rent is privatized, the recipient of economic rent is referred to as a
rentier.
Sumber: http://en.wikipedia.org/wiki/Economic_rent#Land_rent……………….. 2/3/2013
Rente LAHAN
In political economy including physiocracy, classical economics, and other schools
of economic thought excepting neoclassical economics, land is recognized as an
inelastic factor of production. Rent is the distribution paid to freeholders for
"allowing" production on the land they control.
"As soon as the land of any country has all become private property, the
landlords, like all other men, love to reap where they never sowed, and demand a
rent even for its natural produce.
The wood of the forest, the grass of the field, and all the natural fruits of the earth,
which, when land was in common, cost the labourer only the trouble of gathering
them, come, even to him, to have an additional price fixed upon them.
He must then pay for the licence to gather them; and must give up to the landlord
a portion of what his labour either collects or produces.
This portion, or, what comes to the same thing, the price of this portion, constitutes
the rent of land ...."
— Adam Smith: The Wealth of Nations
Sumber: http://en.wikipedia.org/wiki/Economic_rent#Land_rent……………….. 2/3/2013
Rente LAHAN
David Ricardo is credited with the first clear and comprehensive analysis of
differential land rent and the associated economic relationships (Law of Rent).
Johann Heinrich von Thünen was especially influential in developing the spatial
analysis of rents, which highlighted the importance of centrality and transport.
Simply put, it was density of population increasing the profitability of commerce
and providing for the division and specialization of labor that commanded higher
municipal rents. And the high rents determined that land in a central city would
not be allocated to farming, but would be allocated instead to more profitable
residential or commercial uses.
Observing that a tax on the unearned rent of land would not distort economic
activities, Henry George proposed that publicly collected land rents (land value
taxation) should be the primary (or only) source of public revenue; though he also
advocated public ownership, taxation and regulation of natural monopolies and
monopolies of scale that cannot be eliminated by regulation.
Sumber: http://en.wikipedia.org/wiki/Economic_rent#Land_rent……………….. 2/3/2013
RENTE LAHAN
Terminology relating to rent
Gross rent
Gross rent refers to the rent paid for the services of land and the capital invested on it. It
consists of economic rent, interest on capital invested for improvement of land and reward
for risk taken by the landlord in investing his capital.
Scarcity rent
Scarcity rent refers to the price paid for the use of the homogeneous land when its supply is
limited in relation to demand. If all units of land are homogeneous, but demand exceeds
supply, the entire land will earn economic rent by virtue of its scarcity.
Differential rent
Differential rent refers to that rent, which arises owing to differences in fertility of land.
The surplus that arises due to difference between the marginal and intra-marginal land is
the differential rent. It is accrued generally under extensive cultivation of land. The term
was first stated by David Ricardo.
Contract rent
Contract rent refers to that rent which is mutually agreed upon between the land-owner
and the user. It may be equal to the economic rent of the factor.
Sumber: http://en.wikipedia.org/wiki/Economic_rent#Land_rent……………….. 2/3/2013
LAND RENT THEORY & RENT CURVE
Three concepts are at the core of the land
rent theory:
1.
2.
3.
Rent. A surplus (profit) resulting from some
advantage such as capitalization and
accessibility. The rent is the highest for retail
because this activity is closely related to
accessibility.
Rent gradient. A representation of the decline in
rent with distance from a center. This gradient is
related to the marginal cost of distance for each
activity, which is how distance influences its
bidding rent. The friction of distance has an
important impact on the rent gradient because
with no friction all locations would be perfect
locations. Retailing is the activity having the
highest marginal cost, while single family
housing have the lowest marginal cost.
Bid rent curve function. A set of combinations
of land prices and distances among which the
individual (or firm) is indifferent. It describes
prices that the household (firm) would be willing
to pay at varying locations in order to achieve a
given level of satisfaction (utility/ profits). The
activity having the highest bid rent at one point
is theoretically the activity that will occupy this
location.
Sumber: http://people.hofstra.edu/geotrans/eng/ch6en/conc6en/landrenttheory.html……………….. 2/3/2013
EKONOMI LAHAN
Approaches for Determining a Rental Rate
Determining a fair rate is not easy. Cash rents are likely to be too low during
periods of rising prices and high yields and too high during periods of declining
prices and low yields.
Rates often reflect the results of the past few years more than the upcoming year.
1. Estimating a cash rental rate for cropland can be based on:
2. what others are charging/paying
3. average yields
4. corn suitability ratings (CSR index)
5. share of gross crop value
6. return on investment
Renting, also known as hiring, is an
7. crop share equivalent
agreement where a payment is made
8. tenant’s residual.
for the temporary use of a good,
service or property owned by
another.
Sumber: http://www.extension.iastate.edu/agdm/wholefarm/html/c2-20.html……………….. 2/3/2013
Mengapa ada KOTA ?
Mengapa sebaran penduduk tidak merata secara
spatial ke seluruh lanskap?
1. Comparative advantage = Keunggulan
komparatif
2. Sekala ekonomi internal
3. Aglomerasi ekonomi
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Keunggulan komparatif = Comparative advantage (CA)
1. Based not on absolute advantage but on opportunity cost (OC)
2. Wheat and wool example: west can make 6 cloth or 2 wheat in one
hour; east can only make 1 of each in one hour. West has CA in
cloth, east in wheat, because for west OC of cloth is 1/3 wheat unit,
while OC of east for wheat is 1 cloth, which is better than 3 for
west
3. CA leads to trade in this case based on OC
4. Trade is beneficial only if offsets transpo costs
Wheat
Cloth
Output per labor hour OC of Production
East
West
East
1
2
1C
1
6
1W
West
3C
1/3 W
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Keunggulan Komparatif dan Sekala Ekonomi dalam
Transportasi
1. Scale econ in transpo means trans cost is not independent of
volume shipped; cost per unit mile dec. with volume
2. Otherwise producers/consumers would engage only in direct
trade
3. Cities develop if scale economies in transpo
4. Then makes sense for trading firms to operate as intermediaries,
locating at central places for collection and distribution of goods
5. Leads to development of market cities
6. Occurs when: ag productivity is high enough to generate
surplus, CA is large enough to offset transpo costs and scale
economies in transpo
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Sekala Ekonomi Internal dalam Produksi
• As volume increases, productivity per laborer
increases
• Arise because of:
– Factor specialization: worker skill increases with
repetition and spend less time switching between
tasks
– Indivisible inputs: when certain prod input has
minimum indivisible scale; i.e. certain input
facilities/equipment can’t be scaled down
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Area pasar karena sekala ekonomi
1. Defined as area where factory can underprice home
production
2. Workers live near factory and bid up land price, causing
higher density
Cost of homemade product
Net cost
travel cost
Factory cost
Market area
Miles from factory (radius)
Market area
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Aglomerasi Ekonomi dalam produksi (AEP)
• Why do most cities have more than one
factory/production facility?
• AEP: positive externalities allow firms to
produce at lower cost per unit because of
– Localization economies
– Urbanization economies
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
AEP: Lokalisasi ekonomi
When production costs of firm in a certain
industry decrease as total industry output
increases. Due to:
1. Scale economies in intermediate inputs
2. Labor market pooling
3. Knowledge spillovers
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Lokalisasi ekonomi: Sekala ekonomi untuk input
intermedier
• Firms often cluster because they share inputs from the same supplier if:
– Input D of firm is not large enough to leverage the scale economies in input
production alone
– Transportation costs are relatively high; this is not only because it is costly to
transport input but also design/specification of input requires frequent fact to
face contact:
• Manhattan dressmaking and button makers—requires face to face because
designs must be adaptable and producers must supervise input specifications
• Corporate headquarters and advertising/marketing firm: need lots of
interaction; needs constantly changing
• High-tech firm: needs to locate near its suppliers of non-standard parts;
interaction in testing and design of parts
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Lokalisasi ekonomi : Sekala ekonomi untuk input
intermedier
1. Business firms often need many services (finance,
banking, design, insurance, legal, etc.) so big
business clusters develop to exploit scale economies
provided by them
2. Public services also important: areas with good
transportation infratructure, services, schools, will
attract these clusters of firms
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Lokalisasi ekonomi: Labor market pooling
1. Clustering increases labor efficiency
2. Facilitates transfer of workers between firms in dynamic
industries
3. Many industries have high mobility between firms, e.g.
entertainment
4. Leads to more stable wage pool, which means wages can
be lower in general
5. Labor pooling is net benefit to firms if wage at isolated site
is variable (for good and bad economic times) and wage at
cluster is average of those two wages; cluster firm can staff
up or downsize more easily than isolated firm
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Lokalisasi ekonomi: knowledge spillovers
1. Rapid exchange of
information
/technology in
cluster
2. Based partly on
the shared pool of
workers
3. Leads to many
innovation
“corridors”
Foto :smno.Malang.Veteran.Febr2013
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Teori Siklus Produk
1. Incubator process: Often firms cluster when
they are in earlier stage of development
because production techniques unsettled
2. As production becomes standardized, often
move to lower density areas where land and
labor costs are lower
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
AEP: Ekonomi Urbanisasi
1. Production cost of a firm declines as total output of urban area
increases
2. Occurs for same reasons as localization economies
3. Different from localization economies in:
1. Result from scale of entire urban economy
2. Generate benefits for all firms in city, not just in single
industry
4. Rather than being in one industry, benefits cut across industries
5. More empirical evidence for localization economies than for
urbanization, although Mills points to different results
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Teknologi dan Kota
1. Telecom technology may reduce some
advantages from agglomeration economies
2. However, evidence suggests it is more
complement than substitute—actually generates
more demand for face to face contact and travel,
partly because allows for greater specialization
in design/production
3. Business travel actually increase 50% from 1985
to 1995
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Retail: Ekonomi Aglomeratif dalam pemasaran
• Shopping externalities occurs when sales of
one store are affected by location of others
in same product line
• The clustering of similar shops causes sales
for all to be higher
• Two types of products lead to this:
– Imperfect substitutes
– Complementary goods
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Substitusi tidak sempurna
Same product type, but
subtle differences between
product lines;
clustering reduces shopping
costs by facilitating
comparison shopping,
attracting more consumers
Sumber: Lecture by Austin Troy
University of Vermont, based on Arthur
O’Sullivan, Urban Economics
Substitusi tegakan jati dengan non-jati
Sewa Lahan vs. Nilai Pasar
1. Market value: the
present value of
the stream of
rental income
generated by land
2. Rental Income: the
amount the
landowner charges
to use land; equal
to income from
land minus costs
Foto :smno.madiun.Febr2013
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Apakah Nilai Kini (Present Value)?
1. It is the maximum amount an investor would be
willing to pay for something, given that the
investor could safely make i percent returns on
an alternative investment (for instance, a
savings account, or T-bills).
2. It equals, the stream of income, discounted over
time
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Bagaimana PV di-diskonto ?
1. PV takes into account the fact that a dollar earned 5
years from now if worth less to us now than a dollar
earned today
2. This is because income put off until later has
opportunity cost associated with it.
3. A dollar invested in five years is worth less than a
dollar invested today
4. PV takes into account lost opportunity from that
alternative investment
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Bagaimana menghitung PV?
n
R
PV  
t
t  0 (1  i )
• For $20 yearly stream for 5 years at 10%
PV= $20 +$18.18 + $16.53 + $15.04 + $13.70 = $83.45
• For a constant stream of income into infinity, rule
simplifies to PV= R/i = $20/.1= $200
• Non-constant income example:
• PV= $20 + $24/1.1 + $29/1.21 + $34/1.33…etc.
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Nilai-Pasar bagi Lahan
1. Equals PV of annual maximum rental payments
that the landowner can charge
2. For market value to equal PV: given yearly
income R and alternative ROR of i , investor is
indifferent between buying the land and
investing that money elsewhere
3. From here out we talk of land rent in place of
price, and assume users of land pay rent
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Seewa Lahan & Produktivitas
• Value of land, and hence land rent derives from
productivity
• Earliest model of productivity comes from
Ricardo (1821) who looked at land fertility
• Assumptions: fixed inputs/output prices (price
takers), zero profit, 3 levels of fertility, land to
highest bidder, location (transpo costs) can be
ignored, owners are not farmers
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
MODEL RICARDO
1. On fertile land, a farmer can produce same
amount of corn with fewer inputs
2. The price of this type of land is bid up
3. All profit accrues to the landowner in the
form of rents
4. Payment to farmer is considered a cost
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
MODEL RICARDO
MC
ATC
ATC
$
Profit=rent>>
to landowner
Profit=rent>>
to landowner
$8
$4
ATC
MC
$10
Price
determined
exogenously
by supply and
demand in
market
MC
Q=amt of
corn
220
160
“A” land
“B” land
“C” land
“A” land has lowest production costs= highest rents
“C” land’s rent is 0 because costs are greater than revenue
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
MODEL RICARDO
1. Competition among farmers for good land bids
up rents on that land until economic profits* =0
for farmer. All profits on land go to owner.
2. Economic profits: greater than “normal” profits
required to pay for time of those doing the work
3. Rent for A land= TR-TC= $2200-$880=$1320
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Prinsip “Leftover”
• In equilibrium, Rent= profits, or revenue over
total nonland costs
• Rent eats up whatever is “left over” because
competition for land bids away any excess
• That is, competition among farmers for land
bids away excess profits until they are zero
and landowner gets all surplus value
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Perkecualian dari Prinsip “leftover”
• If there is restrictions on entry or on
competition
– E.g. if farmer (non-owners) owns patent to farming
techniques that reduce costs, landlord cannot
charge additional rents reflecting those additional
profits because noone else would be willing to pay
such high rents
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Siapa mendapat manfaat dari “pembangunan”?
1. Contoh : Proyek Irigasi Pertanian
2. If price of corn is fixed (exogenous) the landlord benefits
because competition among farmers for land will bid away
profit
3. Pemenang: Pemilik lahan; “loser”: Petani
4. However, if the project affects the price of corn (price is
endogenous), consumers gain with lower prices, while farmer
pre rent profits are reduced, lowering land rents
5. Pemenang: Konsumen; “loser”: Pemilik Lahan
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Sekala Pembangunan
1. Who benefits is determined by scale of improvement
2. Smaller the area, the more the benefit goes to
landowner; larger the area, more goes to consumers
because of price endogeneity
3. Benefits from any improvement are capitalized into
the value of land; a positive capitalization increases
rents, which increases market value
4. Negative factors can be capitalized too
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
AKSESIBILITAS = Accessibility
1.
2.
3.
Now replace fertility of
land with location as the
prime determinant of
land value--Von Thunen
model (1826)
No longer assume that
transportation is
costless
This model explains
why more “central”
locations command
higher rents and have
higher market values
than fringe areas
Foto :smno.rumahkampus.Febr2013
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
TEORI BID-RENT (Tawaran Sewa)
Bid Rent Theory says that the closer a property is to the center of
the district, the more desireable it is. The further out a piece of
land is, the smaller its value.
The amount that the competing land users are willing to pay for
these properties is called the bid rent.
In agriculture, bid rent is the monetary return a farmer can
receive for growing a particular crop on a unit of land after all
costs of production (including transportation to the market) are
taken into account. Crops with the highest production costs will
be nearest to the market place. Those with low production costs
will be farther away.
Sumber: http://wiki.answers.com/Q/What_is_the_bid_rent_theory ………. 2/3/2013
TEORI BID-RENT
The bid rent theory is a geographical economic theory that refers to
how the price and demand for real estate changes as the distance
from the Central Business District (CBD) increases. It states that
different land users will compete with one another for land close to
the city center.
This is based upon the idea that retail establishments wish to
maximize their profitability, so they are much more willing to pay
more money for land close to the CBD and less for land further away
from this area.
This theory is based upon the reasoning that the more accessible an
area (i.e., the greater the concentration of customers), the more
profitable.
Sumber: ………. 2/3/2013
TEORI BID-RENT
Bid rent curve
CBD= PUSAT KOTA
Sumber: http://en.wikipedia.org/wiki/Bid_rent_theory ………. 2/3/2013
TEORI BID-RENT
Agricultural analogy
Though later used in the context of urban analysis, though not yet using
this term, the bid rent theory was first developed in an agricultural
context. One of the first theoreticians of bid rent effects was probably
David Ricardo, according to whom the rent on the most productive land
is based on its advantage over the least productive, the competition
among farmers ensuring that the full advantages go to the landlords in
the form of rent. Later, this theory was developed by J. H. von Thünen
who combined it with the notion of transport costs. His model implies
that rent at any location is equal to the value of its product minus
production costs and transport costs. Admitting that transportation costs
are constant for all activities, this will lead to a situation where activities
with the highest production costs are located near to the market place.
Those with low production costs will be farther away.
The concentric land-use structure thus generated closely resembles the
urban model described above: CBD - high residential - low residential.
This model, introduced Sumber:
by William
Alonso, was inspired by von
………. 2/3/2013
Bid rent theory in the Central Business District (CBD)
Land users, whether they be retail; office; or residential, all compete
for the most accessible land within the CBD. The amount they are
willing to pay is called bid rent. This can generally be shown in a
‘bid rent curve’. Based upon the reasoning that the more accessible
the land, generally in the centre, is the more expensive land.
Commerce (in particular large department stores/chain stores) is willing to pay the
greatest rent to be located in the inner core. The inner core is very valuable for
them because it is traditionally the most accessible location for a large population.
This large population is essential for department stores, which require a
considerable turnover. As a result, they are willing and able to pay a very high
land rent value. They maximise the potential of their site by building many stories.
As one goes farther from the inner core, the amount commerce is
willing to pay declines rapidly.
Sumber: http://en.wikipedia.org/wiki/Bid_rent_theory………. 2/3/2013
Bid rent theory in the Central Business District (CBD)
Industry, however, is willing to pay to be in the outer core. There is
more land available for their factories, but they still have many of
the benefits of the inner core, such as a market place and good
communications.
As one goes farther out, the land becomes less attractive to industry
because of the reducing communication links and a decreasing
market place. Because householders do not rely heavily on these and
can now afford the reduced costs (when compared with the inner
and outer core),they can purchase land. The further from the inner
core and, the cheaper the land. This is why inner city areas are very
densely populated (terraces, flats and high rises), whilst the suburbs
and rural areas are sparsely populated (semi and detached houses
with gardens).
Sumber: http://en.wikipedia.org/wiki/Bid_rent_theory ………. 2/3/2013
ECONOMICS OF LANDUSE
Every human activity requires some elbowroom.
The qualities of land include, in addition, such attributes as the
topographic, structural, agricultural, and mineral properties of the
site; the climate; the availability of clean air and water; and finally, a
host of immediate environmental characteristics such as quiet,
privacy, aesthetic appearance, and so on.
All these things—plus the availability of such local inputs as labor
supply and community services, the availability of transferable
inputs, and the accessibility of markets—enter into the judgment of
what a particular site is worth for any specific use.
Sumber: http://www.rri.wvu.edu/WebBook/Giarratani/chaptersix.htm ………. 2/3/2013
ECONOMICS OF LANDUSE
COMPETITION FOR THE USE OF LAND
Most land can be utilized by any of several activities. Even an uninhabitable and
impassable swamp may have to be allocated between the competing claims of those
who want to drain or fill it and those who want to preserve it as a wetland wildlife
sanctuary. The normal multiplicity of possible uses means that in considering
spatial patterns of land use, we can no longer think in terms of the individual
location unit or of one specific activity but must move up to another level of
analysis: that of the multiactivity area or region.
Competition for land plays an important locational role in areas where activities
tend to concentrate for any reason. Locations having good soil, climate, and access
to other areas, and areas suitable for agglomeration under the influence of local
external economies are in demand. The price of land, which is our best measure of
the intensity of demand and competition for land, varies with quality and access,
and rises abruptly to high peaks in the urban areas. Anything we can discover
about the locational role of land-use competition, then, has particular relevance to
the urban and intraurban problems that have become so important in recent
years.
Sumber: ………. 2/3/2013
ECONOMICS OF LANDUSE
COMPETITION FOR THE USE OF LAND
In order to understand the way in which land is allocated to various
activities, we shall first ask what determines how strong a bid any
particular activity can make for the use of land—that is, the
maximum rent per acre that that activity could pay for land in
various locations.
In a society that uses prices, costs, and profits as a principal
mechanism for allocating resources, this line of inquiry will help
explain actual location patterns.
It will also provide a rough guide as to which location patterns
represent an efficient allocation of resources from the standpoint of
the economy as a whole.
Sumber: ………. 2/3/2013
ECONOMICS OF LANDUSE
RENT AND LAND VALUE
Our discussion of rents and competition for land has placed almost
exclusive emphasis on the location of a site (relative to markets and
sources of inputs) as an index of its value.
Location has determined how much rent any particular activity can
afford to pay for the use of a site; the purchase price has been
explained as simply the capitalized value of the expected stream of
future rents.
At this point we need to recognize some significant complications
that have until now been ignored.
Sumber: ………. 2/3/2013
ECONOMICS OF LANDUSE
Speculative Value of Land
The expected future returns on a parcel of land may sometimes be quite different
from current returns, particularly in locations where radical changes of use are
taking place or expected. This is generally true around the fringes of urban areas,
where the change involves conversion from farm to urban uses. The price that
anyone will pay for the current use of the land may be quite low in relation to the
speculative value based on a capitalization of expected returns in a new use.
This point is illustrated in the results of a study of agricultural land near the city of
Louisville, Kentucky, well over half a century ago. It will be observed that in the
zones farther than 8 or 9 miles from the city, the current annual rent was
consistently about 5 percent of the average value of the land. In other words, the
value was approximately 20 years’ rent at the current rate.
Closer to the city, the land was worth, on the average, well over 26 times the
current annual rent; the capitalization rate was only 3.8 percent.
This obviously reflected the expectation that returns on the nearby land would rise
as the urbanized area spread.
Sumber: ………. 2/3/2013
ECONOMICS OF LANDUSE
Improvements on Land
A further complication is that land is ordinarily priced, sold, and taxed in
combination with whatever buildings and other "improvements" have been
erected on it, since such structures are usually durable and difficult (if not
impossible) to move.
On urban land, improvements may account for a major part of the value of the
parcel of real estate; and in all cases it is probably difficult to estimate just how
much of the price represents the value of space per se, or "site value."
Sometimes the "improvements" have a negative value: In other words, the land
would be more desirable if it were cleared of its obsolete structures.
Sumber: ………. 2/3/2013
ECONOMICS OF LANDUSE
RESIDENTIAL LOCATION
The analysis of land use developed in this chapter views economic activities as differing in
the value that they place on access to some central location. As indicated earlier, households
are a major land-using activity, and they too are characterized by significant access
linkages. Because of this, some of the principles developed thus far concerning land-use
decisions are applicable to residential location decisions.
One of the first and most widely recognized efforts to explain residential location behavior
is that of William Alonso.15 Alonso applies the concept of bid rent in order to isolate factors
that contribute to the household’s willingness to pay for access to the central business district
(CBD) of an urban area. Bid rents have been defined as the maximum rent that could be
paid for an acre of land at a given distance from the market center, if the activity in
question is to make normal profits. Here, however, we want to analyze residential location
behavior, so the concept of profits is no longer relevant to the decision-making process.
Instead, Alonso recognizes that households make choices among alternative locations based
on the utility or satisfaction that they expect to realize. Consequently, the bid rent of a
household is defined as the maximum rent that can be paid for a unit of land (e.g., per acre
or per square foot) some distance from the city center, if the household is to maintain a
given level of utility.
Sumber: ………. 2/3/2013
ECONOMICS OF LANDUSE
The figure presents several bid rent curves labeled u1, u2,
and u3 for one household. Each of these curves plots the
relationship between rent bids and distance from the CBD
associated with a different level of utility.
These curves have several important characteristics.
First, they are negatively inclined. As developed earlier in
this chapter, the rent gradient of a particular activity plots
out decreasing rent bids as distance from the market
increases because of transfer costs. Household rent bids are
similarly affected by transfer considerations. An individual
facing a daily commute to the CBD for work or shopping,
or both, must pay lower rents in order to offset the
associated transfer costs of a longer trip, if utility is to be
held constant.
Second, lower bid rent curves are associated with greater
utility. Assuming that the household’s budget is fixed, at
any given distance from the CBD, if a lower rent bid is
accepted, more other goods can be consumed. Therefore,
utility will increase.
Finally, bid rent curves are single valued. This means that for a given distance from the CBD only one rent
bid is associated with each level of utility. By implication, we may state that bid rent curves cannot intersect;
otherwise they could not be single valued.
Sumber: ………. 2/3/2013
ECONOMICS OF LANDUSE
Production of land may be use for "farming", residential, industrial or commercial occupancy. Best and
highest "use" refers to the production which gets the highest bids from all non-coerced bidders, while the
seller is not coerced to sell.
Sumber: http://www.landandhousing.com/GROWTH.html………. 2/3/2013
ECONOMICS OF LANDUSE
A Basic Sequence of Rural
Land Uses
In von Thünen’s schematic
model, he assumed that the land
was a uniform flat plain (not too
unrealistic for the part of the
world where he farmed), equally
traversable in all directions.
Consequently, the various land
uses could be expected to
occupy a series of concentric
ring-shaped zones surrounding
the market town, and the
essential question was the most
economical ordering of the
zones.
Sumber: http://www.rri.wvu.edu/WebBook/Giarratani/chaptersix.htm………. 2/3/2013
ECONOMICS OF LANDUSE
A bid-rent curve is a graph of
the variations in land rents
payable by different users
with distance from some point
in the market, usually the
CBD.
Since transport costs rise with
distance from the market,
rents generally tend to fall
correspondingly, but different
forms of land use (retail,
service, industrial, housing, or
agricultural) generate
different bid-rent curves.
Sumber: http://www.answers.com/topic/bid-rent-theory………. 2/3/2013
ECONOMICS OF LANDUSE
Bid-rent theory
In order to have a good
understanding of the
way urban areas are
likely to grow, it is
important to have an
understanding of Bidrent theory.
The diagram shows
what various land-users
are prepared and able to
pay for good access to
the CBD:
Sumber: http://www.s-cool.co.uk/a-level/geography/urban-profiles/revise-it/central-place-and-bid-renttheories………. 2/3/2013
ECONOMICS OF LANDUSE
Bid-rent theory
It can be seen that commerce (in particular large department stores/chain stores)
is willing to pay the greatest rent to be located in the CBD. The CBD is very
valuable for them because it is traditionally the most accessible location for a large
population. This large population is essential for department stores, which require
a considerable turnover. As a result, they are willing and able to pay a very high
land rent value. They maximise the potential of their site by building many stories.
As you move from the CBD, commerce is unwilling to pay as much for a site. In
fact, what they are willing to pay declines rapidly.
Industry is, however, willing to pay to be on the outskirts of the CBD. There is
more land available for their factories, but they still have many of the benefits of
the CBD, such as a market place and good communications.
As you move further out, so the land is less attractive to industry and the
householder is able to purchase land. The further you go from the CBD, the
cheaper the land. This is why inner city areas are very densely populated (terraces,
flats and high rises), whilst the suburbs and rural areas are sparsely populated
(semi and detached houses with gardens).
Sumber: http://www.s-cool.co.uk/a-level/geography/urban-profiles/revise-it/central-place-and-bid-rent-theories ………. 2/3/2013
ECONOMICS OF LANDUSE
Land Use Pattern Models : Concentric Ring Model - Bid Rent model
Sumber: http://www2.hawaii.edu/~matt/366/cities1.html………. 2/3/2013
PETANI WORTEL
• Assume: land is equally fertile, profits are zero,
there is one central market, p is fixed and
farmers use fixed factor production
• Cost is now fn of distance
– Transport Cost= cost/ton/mile*dist*Q
– Profit= P*Q-PC-TC-Rent = 0
– Rent= P*Q-PC-TC
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Carrot Farmer’s bid rent function
Total revenue per acre (P*Q; Q/acre does not vary)
$300
$250
Total Cost
$190
Bid
rent/acre
Land rents
$110
$50
Close
Distance to market
Far
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
KEPUTUSAN PETANI PEPAYA
1. Now, market-proximate land replaces fertile
land as the most valuable type
2. However, competition for close land bids away
surplus profit so, assuming farmers are
identical, they are indifferent among all
locations, as long as total revenue exceeds total
cost
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Petani dan Faktor Substitusi
1. What if farmers can be different? Then the bid-rent
function becomes convex.
2. Under linear function, fixed amount of land and nonland inputs, no matter where
3. Under convex function, farmers engage in factor
substitution: they increase non-land inputs
(equipment, labor, technology) as land gets more
central and expensive
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Bid Rent fn for both farmers
Rent/
acre
Bid rent for flexible farmer
Bid rent for fixed-factor
farmer
Distance to market
U*
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Bid rent of flexible farmer
1. Flexible farmer will outbid the inflexible farmer in
all locations but u
2. That is, land will be used more intensively and,
hence, more efficiently at central locations, and nonland inputs will be fewer far away
3. With inflexible farmers, land is used more
inefficiently
4. Rents will still equal profits of highest bidder
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Two competing land uses
• Different land uses (e.g. SPAM factory and grain
farm) may have different bid rent functions. The
shapes of those functions will determine who will
locate where
• Steepness of fn determined per unit transport costs
relative to per unit price
• As usual, land goes to highest bidder
• Market allocates land efficiently to usage with the
most to gain from being close to the market
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Determinants of bid rent slope
1. Per acre transportation costs. The more
weight you produce/acre, the more
transport will cost per acre cultivated. E.g.
potatoes vs. cotton
2. Unit transport costs. The more a given
unit weight costs to ship, the higher the
transport costs. E.g. eggs vs. turnips
Foto :smno.kediri.plemahan.febr2013
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Bid Rent fn for both farmers
Heavy good
Rent/
acre
U’= where heavy use transitions to light
use
Light good
U’
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Bid Rent of Firms in the CBD
• Profit is:
– = PQ-NC-TC(d)-R(d)
– Profit= price*quantity – nonland costs- transport
costs (function of distance) – rents (function of
distance);
– TC(d)= cost/ton/mile* distance*quantity
– Then R(d)= PQ-NC-TC(d)
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Freight Costs and Rents
1. Freight costs decrease with proximity to city
center
2. Through leftover principle, rents increase as
transport costs decrease
3. Hence, there will be a downward sloping bid
rent function; it will be linear for fixed factor
producers and convex for flexible producers
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Flexible versus fixed producers
Fixed: R(d)= P*Q-NC-TC(d)
Flexible: = P*Q-NC-TC(d)-R(d)*L(d),
Where L(d) is amount of land used at distance d;
this results in rent function:
R(d)= (P*Q-NC-TC(d))/L(d)
Flexible farmer substitutes nonland for land
input: spends more on equipment and labor as
land gets more expensive
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Flexible versus fixed producers
Flexible produce = factor substitution
= lower costs* = higher profits
By leftover principle, higher profits=
higher bid rents
Close to city center, land costs are
lower; at periphery, freight costs are
lower
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Monocentric city firms’ bid rent function
flexible
producer
Bid
Rent
Fixed-factor
producer
The flexible firm outbids the fixed
factor firm everywhere but point u’’. At
u’, the fixed factor producer uses too
much land
B
A
u’
u’’
Distance from export hub
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Nonland versus land inputs for the Flexible
producer
Nonland
inputs
B
flexible
producer
A
Land Amount
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Most central firm type: offices
1. Office firms: require 1) lots of meetings and face
to face contact, 2)ability to gather, process and
distribute information quickly and 3)access to
services, like printing, lawyers, designers,
accountants, etc.
2. This type of firm will have a steep bid rent
function because the travel cost of individuals is
very high; travel cost is high because their pay
rate is high, since it is generally skilled work
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Land use in CBD
1. All firms are attracted to center, but only some will be
willing to bid enough
2. Office firms have steepest bid rent fn, and will occupy
the most central land
3. Market allocation is efficient, because the office
industry has the most to gain from being in the
center; manufacturing could gain too, but not as
much, so it’s willing to locate a little further out.
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Office vs. manufacturing
1. Suppose office firm 1 block from center and manufacturer 5
blocks. If they swapped locations, this would dramatically
increase the office firm’s travel cost
1.
Office firm TC= 3min/block*$4/min*200 meetings/month= $2400 per
block/month
2. So the swap increase TC for office by $9,600/mo, but only
saves the manufacturer $800/month in transportation costs
(50 tons * $4/ton/block= $200/block).
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Multiple land use rent gradient
Office Bid
rent
Manufacturing
Residential
zone
zone
Bid
Rent
Manuf. Bid
rent
Residential
bid rent
Office
zone
U’
U’’
Distance to center
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Locational choices
Residential Zone
Manufacturing Zone
Office Zone
U’
U’’
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Pilihan Lokasi
Residential Zone
Manufacturing Zone
Office Zone
U’
So workers live on the
periphery because they are
cheap to transport (i.e.
commuting costs are low)
relative to cost of moving
freight (for manufacturers).
For offices, same problem,
because of high price of
moving executives around
for meetings. If office is in
suburbs, executive is
constantly going to CBD
U’’
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Siapa menghuni apa?
• Activities are arranged according to transport costs;
those with the highest costs occupy the most central
land
• Activity with the highest transport cost will have the
highest bid rent curve
• All firms have tug-of-war between locating centrally to
keep transport cheap, and locating in the suburbs to
keep workers’ commute cost lower (and hence pay
lower wages)
• CBD wins because cost of freight hauling greater than
cost of moving workers
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Fungsi harga perumahan
1. In the monocentric model, residents will be
attracted towards the center but be outbid by
offices and manufacturing.
2. Assume no factor substitution, identical 1000 sq
ft houses, fixed budget of $300/mo for
housing+commuting, commute cost (CC)=
$20/mi.
3. WTP for housing = $300- CC.
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Fungsi harga perumahan
$.3
D for housing near center pushes
up price until rent= budget-CC.
P
housing/
sq ft
Residents now indifferent
among all locations in city
$.18
$.06
6 mi
12 mi
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Fungsi harga perumahan dengan substitusi konsumen
1. With consumer substitution, residents consume less land
as price of land goes up; instead consume more local
amenities
2. Hence, more central homes are smaller
3. Flexible residents will outbid fixed factor residents
everywhere but tangency point
Ph
t
 h ,
u
H (u )
4. Change in P due to distance =
or negative of
(tranpo cost/mi divided by amount of housing consumed)
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics
Fungsi harga rumah hunian dengan subsitusi konsumen
$.3
Price w consumer sub
P
housing/
sq ft
$.18
$.06
6 mi
12 mi
Sumber: Lecture by Austin Troy University of Vermont, based on Arthur O’Sullivan, Urban Economics