Modelling Rural Land Use in New Zealand - A Discrete Choice Perspective

The economic model I use to describe landowners’ land use decisions is a standarddiscrete choice random utility maximization model.1 Land is of heterogeneous quality, andsuitability for the various uses depends on (multiple dimensions of) quality. Therefore, at anygiven time, potential benefits derived from each parcel vary by use. As economic conditionschange, production technologies advance and the farmer accumulates human capital, the relativedesirability of land use alternatives may change on any parcel. When the top-ranked alternativechanges due to these forces, the farmer converts the parcel to a different use. The observedpattern of land use therefore represents a snapshot of outcomes from a dynamic process.