Because they are synonymous with the distribution of population, structures, activities, and natural resources, land use patterns affect public policies. Similarly, public policies shape land use patterns by changing the returns from holding land in alternative uses. Increasingly, researchers are acknowledging the social and environmental externalities generated by private land use decisions. A growing number of communities are confronting issues such as the cost of providing public services to different land use patterns (e.g., schooling, sewer, water, fire); the effect of land use patterns on surface and groundwater quality; and the impacts of land use patterns on local housing values. As a result, the popular press and media are giving significant attention to the repercussions of changing development patterns. Recognizing the extent to which public policies affect private land use decisions is an important component of understanding the behavioral dimension of land use patterns.

This research examines the effects of the transportation network on private land use decisions. The transportation-land use linkage is dynamic. Travel and land use patterns are mutually dependent. At the heart of this dependence is accessibility, which is jointly defined by travel patterns and characteristics of the transportation network. Access is valued by individuals and firms when choosing locations. Therefore, changes in accessibility can spur changes in land use pattern. In turn, changes in land use pattern can modify travel patterns and alter perceptions of accessibility, which together affect the performance of the transportation network.

Conventional methods used to assess the benefits and costs from transportation investments do not address their secondary effects on private land use decisions, nor do standard transportation engineering and planning models. Instead, these analyses treat land use pattern as an exogenous factor. As a result, predictions of the returns from proposed investments are based on naive forecasts of land use and travel patterns. Without reasonable predictions of land market responses, transportation investments may have unexpected and/or adverse results.

This paper develops a model of land conversion to enable the endogenous treatment of land use pattern when planning for and evaluating transportation investments. The extent to which the consideration of behavioral responses makes a difference in characterizing the return from highway investments is explored by comparing the spatial distributions of predictions of land use and trips made with this approach with those derived using conventional transportation planning methods. While drawing from other researchers, this paper takes a micro-level perspective and focuses on ex-urban land use change, exploiting parcel level data and geographic information system (GIS) resources to better represent the spatial aspects of the transportation-land use linkage.

Since it is the spatial pattern and distribution of land uses that drive activity patterns, congestion, and travel costs, the externalities associated with the transportation-land use linkage are inherently spatial. Spatial externalities demand spatial economic modeling. In addition to furthering empirical understanding of the transportation-land use linkage, this research employs newly developed spatial econometric methods, awarding emphasis to the spatial association between values observed at different locations and the systematic variation of phenomena by location.