A conceptual partial equilibrium model of global agricultural land use

Preprint, 2012

We introduce a conceptual partial equilibrium model of global agricultural land use, based on heterogenous land quality--an area that has received less theoretical attention than location theory. The model is based on maximization of land rent at each parcel through choice of crop and input intensity. Mechanisms of land rent and land-use competition are illustrated in a transparent way, which can be used for e.g. policy testing and for improved understanding of results from larger land-use models. A strength with this approach is that the model to a large extent can be analytically explored. We show how different crops are optimally distributed on land according to their respective area-dependent cost, i.e. costs paid per area regardless of yield. Crops with high such costs are grown on more productive land and crops with low such costs are grown on less productive land, in equilibrium. The equilibrium solution of the model is unique. Further we show how prices are connected between crops that compete for land.