Economic analysis of farmland protection policies in Ontario

The main objective of this study was to assess the economic rationale of farmland protection policies in Ontario.;The property rights literature was reviewed to discuss the externality rationale of government regulation of farmland development. The findings are that properly defined property rights along with nuisance and trespass laws, can be used as an alternative to land use regulation in the allocation of land, and thus argues against the externality rationale of farmland protection policies.;An analysis of farmland area, cropland area and food production in Ontario was undertaken to assess the food security rationale of farmland preservation. The results indicate that food production in Ontario has consistently increased over time. Conversion of farmland to non-farm uses is therefore not a major threat to food production at the present time.;An economic model was developed to determine the optimal land allocation. A farmland rental demand function was also estimated. The result indicates that the demand for farmland has an elasticity of ;Sensitivity analysis indicated that shadow values of farmland protection policies are larger the higher the price ratio of non-farmland to farmland and the more elastic the non-farmland demand elasticity.;A comparison of the shadow values of this study with estimated willingness to pay for amenity benefits associated with farmland indicates that the shadow values of farmland protection policies are greater than the willingness to pay for amenity benefits. However, the shadow values estimated in this study are gross values and do not take into account all external benefits and costs associated with farmland and non-farmland. Furthermore, future benefits and costs of alternative land uses are not known. Estimation of these benefits and costs are beyond the scope of this study. It cannot therefore be concluded on the basis of the shadow values, that current farmland policies are unjustified. The conclusion on the justification of farmland protection policies can only be made after including all benefits and costs and weighing these shadow values to the discounted future benefits of farmland protection policies.