The dynamic and indirect spatial effects of neighborhood conditions on land value, spatial panel dynamic econometrics model

Abstract

Land value is the product of past decision of its use leading to its value, as well as the value of the surrounded land. It is also affected by the local characteristic and the spillover development demand of the previous time period. The effect of each factor on land value will have dynamic and spatial virtues. Thus, a spatial panel dynamic model is used to estimate the particular effects. The model will be useful for predicting the future land value or the effect of implemented policy on land value. The objective of this paper is to derive the dynamic and indirect spatial marginal effects of the land characteristic and the spillover development demand on land value. Each effect is the partial derivative of the expected land value based on the spatial dynamic model with respect to each variable, by considering different time period and different location. The results indicate that the instant change of local or neighborhood characteristics on land value affect the local and the immediate neighborhood land value. However, the longer the change take place, the effect will spread further, not only on the immediate neighborhood.