Measuring external costs of rural–urban land conversion: An empirical study in Wuhan, China

Externalities of rural–urban land conversion are major factors in the inefficiency of land resource allocation. Although many studies have proposed policy solutions of externalities, measuring externalities is still a challenge. According to definition of externalities, externalities of rural–urban land conversion are the sum of nonmarket externalities and market externalities during land conversion process excluding owner of converted land. Therefore, to measure external costs accurately, the identification of internal parcels (converted parcels) and external parcels (influenced parcels) is necessary, and both nonmarket and market external costs should be considered. This paper proposed an improved approach to measure external costs by division of parcels. Firstly, the approach distinguishes internal parts and external parts by GIS technique and field surveys, and uses the boundary where WTP just decrease to zero to define extent of external part basing on Loomis' linear equation. Secondly, the model enumerates and analyzes effects of externalities in rural–urban land conversion. Finally, to integrate these effects, the approach uses questionnaire survey and the method combining contingent valuation method (CVM) with analytical hierarchy process (AHP) to solve “whole-part bias” and to acquire results. In the empirical study, Dongxihu district, Huangpi district, Caidian district and Jiangxia district are chosen as study area according to extend direction of Wuhan, China. Our result shows that in Wuhan, the external cost of rural–urban land conversion is 1.2 × 104–32.6 × 104 yuan/hm2/a. Among these effects, market external costs such as irrigation facility destruction, water pollution and local government restriction cause large damages. However, non-market external costs including deterioration of air quality, noise pollution, landscape broken and accumulation of refuse are common phenomenon in land conversion. The measurement process of external costs highlights that internal and external part division are essential in externality measurement. The result of externalities measurement could provide a standard for compensation and tax policy in rural–urban land conversion. Besides, space extent of externalities could provide reference for zoning and green belts policies.