The impact of soil contamination on farmland values: Revealed preference versus stated preference

Abstract

The presence of soil contamination in agricultural land is a persistent and harmful problems for farmers. In this study we aim to determine the impact of soil contamination on farmland values using revealed as well as stated preference techniques. Therefore, both methods are applied in the Campine region, an agricultural area in Belgium that deals with elevated cadmium (Cd) concentrations. First, a hedonic price analysis is used to relate soil Cd concentrations to farmland values based on a dataset of 599 farmland transactions between 2004 and 2011. Afterwards, a discrete choice experiment (DCE) is administered among 200 farmers that were member of Boerenbond Limburg. Hedonic regression results show that soil Cd concentrations do not significantly affect farmland prices. However, the DCE indicates that farmers experience significant less utility from contaminated farmland in case they are explicitly informed on the resulting land use restrictions. Possibly, a lack of information on the consequences of the contamination is on the basis of the insignificant result in the hedonic price analysis, although there are other interpretations that might explain these seemingly contradictory results as well. Furthermore, both analyses specify which factors are important determinants of farmland values in the Campine region.