External benefits of agricultural land preservation are essential for the agricultural land preservation compensation and the decision-making of rural-urban land conversion. However, estimating external benefits of agricultural land preservation faces two challenges. One is the proper identification of the influence extent of external benefits; the other the explicit measurement of the external benefits. While previous literatures focused on external benefits of agricultural land preservation in the term of environmental and social effects, few studies analyze the influence extent of external benefits and the method of external benefits measurement. This paper tries to fill this research gap. We defined and identified the external benefits extent of agricultural land preservation and measured external benefits of land preservation basing on investigation of WTPs(willingness to pay) for agricultural land preservation in Wuhan, China.
First, we theoretically defined and identified influence extent of external benefits of agricultural land preservation. Based on Buchanan and Stubblebine's definition of externality, external benefits of agricultural land preservation in China are not being rural collective and farmers, but individual utilities from agricultural land preservation. From that definition, theoretical analysis showed that the measurement process should distinguish internal and external parts (generator and receiver). After Loomis (2000), we found that willingness to pay decreases with distance and regarded boundaries of extent as where WTP is equal to 0. However, the linear relationship between WTP and distance is not significant and the scale of agricultural land preservation is county in China. So we further modified Loomis' method to fit into our China case study.
Second, we estimated external benefits of agricultural land preservation empirically basing on WTP method and extent identification of external benefits. In the WTP estimation process, CE (choice experiment) method was applied where farmland, garden land, forest and fishing pond preservation were chosen as attribute variables. As a result, the mean WTPs of farmland, garden land, forest and fishing pond are 257.69, 311.31, 333.81 and 129.28 Yuan per household respectively. These results are similar with those by Cai's(2007) using CVM(contingent valuation method). In the extent identification process, stated preference method was used. We found that most residents from central districts of Wuhan chose to preserve agricultural land in the whole Wuhan city,while residents from districts which still have lots of farmlands intended to pay for preserving agricultural land in their own district. After WTP estimate and extent identification, three methods were proposed to measure the external benefits of agricultural land preservation. We further analyzed the errors among different extent definitions. The first method, which is traditional, took administrative jurisdiction as extent of external part; the second method defined extent of external part as all the places where residents have the highest support; the third, which is close to the reality, considered all individuals' preference of preservation extent. Our third method shows that the external benefits of farmland, garden land, forest and fishery pond in Wuhan are 30773.2yuan/hm²,653860.0yuan/hm²,119267.0yuan/hm² and 82472.7yuan/hm² respectively. These values are significantly different than those from the first and second methods. Apparently, using jurisdiction extent instead of extent of external part would overstate external benefits of agricultural land. We further discussed the policy implications from such different estimates.