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https://hdl.handle.net/2142/68370
Description
Title
The Determinants of Land Values in Accra, Ghana
Author(s)
Asabere, Paul
Issue Date
1980
Department of Study
Finance
Discipline
Finance
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Finance
Language
eng
Abstract
The principal objective of this dissertation is to investigate empirically the factors that determine land values (i.e., vacant-lot prices). The secondary objective is to demonstrate empirically the coherent response of the 'intensity of land use' to land price variation.
In order to realize the first objective a relevant regression model is developed to form the basis of the empirical analysis. The empirical results revealed that the variables: distance from the city center; distance from the sea; nearness to major streets (roads); governmental zoning (commercial, high-class residential, and low-class residential); time of sale (month of sale); ethnic clustering (predominantly 'Ga' areas and 'Zongos'); seller type ('stool'); site services; lot size, all significantly affect lot prices in Accra.
The second objective of this study is realized via the estimation of elasticity of substitution production functions for Accra. Variation in the intensity of land use (the capital-land ratio) is related to the variation in the ratio of land price to the price of capital and the technology with which land and capital are combined. Two types of production functions were estimated: the CES and the VES. The results of the CES production function indicated that the elasticity of substitution for Accra was 0.49. This result indicates that a 1% increase in relative factor prices will induce 0.49% increase in the 'intensity of land use'. This is lower than those found for U.S. cases. For example a study for the Santa Clara County, California by Sirmans et al., established a CES elasticity of 0.60%. In another study, Koenker found an elasticity of substitution of 0.71%. Substitution appears 'harder' in Accra than the two U.S. cases. Using the VES function, a mean elasticity of 0.53 is indicated for Accra. The VES function proved superior to the CES function. In order to capture the effect of time or technological change on the elasticity of substitution, time was introduced into the model. The result of this reveals that the mean elasticity of substitution increased over time. By the end of 1974, the mean elasticity of substitution is estimated at 0.26. By the end of 1978, the estimated mean elasticity had increased to 0.62. Housing production technology improved and the substitution of capital for land became easier for Accra.
By establishing that conventional variables like distance from city center, nearness to roads, zoning, lot size, time of sale, and so on, significantly affect lot prices, this study has clearly demonstrated the existence of a land market. This is contrary to the notion that there exists no land markets in the cities of a developing country like Ghana. By demonstrating that land price variation significantly affects the 'intensity of land use', this study has shown that the price mechanism works in the allocation of the resources in these markets. Again, this study has demonstrated that the urban explanatory theories of the developed countries can be applied to cities like Accra with minor adaptations.
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