Land Price and Royalties in Colombia: A Spatial Analysis for Oil Producing Municipalities

Regions that base their economic activity on extraction of mineral resources are characterized by generate over rents that have physical and institutional effects on the territory. This paper analyses how rents related with royalties have an impact on land values of petroleum producer municipalities. Through a hedonic approach land values are estimated using an econometric specification with spatially correlated errors. It is argued that after controlling by location, income and amenity variables, in those municipalities where royalties are perceived, land values are significantly lower. It can be concluded that the effect of royalties affects in negative way the spatial equilibrium even with a higher consumption of amenities.