Abstract
This article reports the results of an extensive survey of owners of undeveloped land in and outside the Shashemene City. After identifying several distinct owner types, the authors demonstrate that changes in ownership, as well as in the character and use of land, begin more than twenty years before the rural countryside is actually converted to urban use. These findings have important implications for the design and implementation of policies attempting to control or direct urban growth. In particular, a simple dynamic model that explains the optimum length of time to hold a parcel of land from a market was developed and its properties were analyzed both qualitatively and numerically. One finding is that the speculator will hold the land for the marginal period only if the difference between present net rates of return exceeds the difference between discounted expected per cent returns. On the other hand, if land speculators held land for one year, property tax increased by 0.000079 birr per year, which is inappropriate methods to control land speculation . Keywords : Land speculation; Model; Property tax; Speculators; Sprawling. DOI : 10.7176/JEES/9-1-05
Highlights
Much academic attention has been devoted recently to describing and analyzing the causes, nature, and economic implications of urban sprawl (Aurand, 2007).most research in this area has focused on the costs and causes of non-compact forms of urban development
Developing Land Speculation Model In order to develop a model to explain the optimum length of time to hold a parcel of land, assume the value of the land to be increasing at a decreasing rate, i.e., 0 and /, 0 where represents the rate of increase in market value
If local government policies of constraint are to be directed toward the speculator, it appears that the effect must come either directly through an increase in the property tax or indirectly through an increase in the degree of uncertainty associated with holding the land
Summary
Much academic attention has been devoted recently to describing and analyzing the causes, nature, and economic implications of urban sprawl (Aurand, 2007).most research in this area has focused on the costs and causes of non-compact forms of urban development. The development of a model to explain the actions of an urban land speculator necessitates a statement of temporal rather than static equilibrium conditions This problem is analogous to the classic examples of how long should the tree be permitted to grow or how many years should the wine be permitted to age. The optimality conditions are developed in terms of the ratio of the difference between the rate of return on the land and an opportunity cost for the current period, to the discounted difference between these rates for the aggregate of all future periods These conditions can be much more explained when discrete time periods are considered. In formulating the model this way, it is implied that the landowner faces the sell or hold decision at the beginning of each period and makes his decision on the basis of what he expects in terms of net benefits for the coming period, and his evaluation of aggregated, discounted net benefits in all future periods
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