Valuation of ecosystem services from rural landscapes using agricultural land prices

Agricultural lands, primarily managed for crops and livestock production, provide various ecosystem services (ES) to people. In theory, the economic value of the service flows that can be captured privately is capitalized into land prices. This study proposes an integrative framework to characterize the ecosystem services associated with agricultural lands. Using that framework, we demonstrate how hedonic analysis of agricultural land prices can be used to estimate the private values of land-based ES. The model is estimated with data from southwestern Michigan, USA. Results suggest that ES values are associated with lakes, rivers, wetlands, forests and conservation lands in rural landscapes. Ecosystem services that support direct use values, such as recreational and aesthetic services, are likely to be perceived by land owners and capitalized in land prices. Some regulating services that provide indirect use values may be partially capitalized in a land parcel's relationship to natural resources and landscapes. Other ES from the land parcel and its surroundings are unlikely to be capitalized due to lack of private incentives, unawareness, or small perceived value. The private ES values measured in this study highlight opportunities to design cost-effective public policies that factor in the value of private benefits from agricultural lands.

Research Highlights► Land prices can reveal the economic values of many ecosystem services. ► A new framework shows when land prices can measure ecosystem service values. ► Recreational and aesthetic ecosystem services have high value in southern Michigan. ► Surrounding landscapes and nearby water bodies add value to parcels of farmland. ► Environmental values embodied in land prices can help design conservation policy.