Forest proximity impact on undeveloped land values: A spatial hedonic study

Abstract

In the study we examine the impact of the Las Wolski forest in Krakow (Poland) on undeveloped land values using the hedonic regression method, using OLS (ordinary least squares), SAR (Spatial Autoregressive Model) and SEM (spatial error model).Although the discussion on the economic role of forests has been carried out for decades in mature market economies, there is scarce evidence based on data from emerging markets that were subject to a post-socialist transition. Another reason to undertake the study is the strong belief that new econometric tools (mainly spatial hedonic regression) can lead to more robust understanding of the influence of forest proximity on property values.We found strong evidence of a positive impact of forest proximity on undeveloped property transaction prices, although the importance of this variable is considerably smaller than that of other factors controlled for. On average a one hundred meter increase in distance from the forest decreases land value by 3%.