Farmland Allocation along the Rural-Urban Gradient: The Impacts of Urbanization and Urban Sprawl

In the vicinity of a city, farmers are confronted with increasing agricultural land prices and rents along the rural-urban gradient, but they concurrently enjoy the advantages associated with proximity to a larger and wealthier consumer base. We hypothesize that farmers transition from low-value, land-intensive \traditional" crops to high-value, labor-intensive \specialized" crops on parcels located closer to urban centers. Once returns to development of a parcel exceed the profits associated with farming, exurban farmers may sell their land for conversion to urban use. Urban pressure in the rural-urban fringe intensifies as cities expand. We differentiate between a gradual process of urban growth (or urbanization) and urban sprawl. Utilizing farmland fragmentation measures as indicators of sprawl, we hypothesize that urban sprawl burdens \traditional" farms to the extent that they accelerate the transition to specialized crops or convert farmland to urban use. We use crop-specific land cover data at the level of grid cells and a state-of-the-art system of spatially correlated simultaneous equations with data for the metropolitan area of Indianapolis, IN and its immediate hinterland. Our initial empirical results corroborate that accelerated urban development around Indianapolis in the 1990s is associated with land uses characterized by fewer field crops and more idle land.