3. Economic Returns to Land Resources: Theories of Land Rent

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1 3. Economic Returns to Land Resources: Theories of Land Rent
Nindyantoro

2 3.1. Basic Concepts of Land Rent (1)
What is land rent? Price paid for the service of a unit of land Land rent is return to land Return to land is residual payment to land

3 3.2. Basic Concept of Land Rent (2)
(d) Essentially, land rent is economic surplus obtained from operating a unit of land (e) Rent can be measured either as average value or marginal value. (f) Land rent affected by many factors

4 3.3. Classical Theories of Land Rent (1)
Two Competing Theories Ricardo Von Thunen Ricardo’s Theory of Land Rent Based on differential quality of land Higher fertility of land  higher rent for the land Illustration

5 Teori Land Rent Ricardo
Ricardo mendalami rent pada pertanian Asumsi daerah subur yang baru sedikit porsi yang diolah untuk bertani demi menghidupi populasi Rent tidak ada pada kondisi itu. Rent timbul ketika ada kebutuhan untuk mem buka lahan yang kurang subur.

6 3.3. Classical Theories of Land Rent (2)
Illustration for Ricardo’s Items Land A Land B Land C Yield 50 40 30 Total cost 100 Cost per Unit 2,00 2,50 3,33

7 3.3. Classical Theories of Land Rent (3)
(b) Von Thunen’s Theory Based on distance to market Closer to market  higher rent for the land Illustration

8 3.3. Classical Theories of Land Rent (4)
Illustration for Von Thunen’s A unit of land produce sugarcane (1 ha) Total production of sugar = 10 ton per ha Total cost production = $ 13,8 per ton Price of sugar = $ 15 per ton So, surplus per ton sugar = $ 1,20 per ton If the land locates around the market, cost of transport = $ 0. Hence, total surplus $ 12 per ha. This is land rent

9 Von thunen Jika Ricardo membahas perbedaan kualitas kesuburan lahan, maka von thunen menekankan pada fakta bahwa rent timbul dari adanya perbedaan lokasi. Lahan yang dekat kota menikmati keuntunggan melebihi yang berjarak jauh dari kota. Perbedaan itu dapat dinilai dalam bentuk biaya transportasi

10 Henry George Interest in Capital Invested in Land Vs rent on land itself Rent exist no matter owner or occupier the same or not Rent merupakan bagian dari kekayaan yg diproduksi dari hak ekslusif pemilik tanah Rent merupakan harga monopoli yang timbul dari kepemilikan individu

11 3.4. Using Marginal Value Approach to Estimate Land Rent
Concept of Marginal Product (MP) Maximum profit  MP = w (upah riil) Total Product (TP) Total payment to labor (PL) = W x L Land rent = TP – PL Diagram Illustration

12 3.5. Comparing Land Rent for Two Different Quality Plots of Land
Differentials in land fertility  differentials in curves of AP, and MP Lower quality land use less labor than higher quality of land Land rent paid for lower quality land is smaller than that paid for higher quality land Diagram illustration

13 3.6. Other Factors Affecting Land Rent
Production Technology Price of output  condition of output market Wage rate  condition of labor market

14 3.7. Population Pressure and Land Rent
Population pressure on agricultural land ? Increase in work force due population growth Supply of agricultural land  relatively fixed Impact on land rent Wage rate declines, while land rent increases Population pressure is a conducive factor for land accumulation and marginalization to prevail in rural areas