Market thinness, income sorting and leapfrog development across the urban-rural gradient

This paper investigates the conditions under which thin residential land markets generate an incentive for leapfrog development. We provide empirical evidence that suggests the presence of thinly traded land market in exurban areas. We develop a spatial model of an exurban land market that incorporates this key feature and show the conditions under which leapfrog development emerges. Specifically, given increasing market thinness with distance and a limited number of heterogeneous buyers, higher income households are able to bid down land prices at farther away locations. This creates an incentive for leapfrog development and leads to a positive income gradient, which we also confirm empirically. •Leapfrog development can arise from thinly traded rural land market.•Develops a structural model on land use change for thinly traded land market.•Provides empirical evidence suggesting the existence of thinly traded land market.