The Cost of Species Protection: The Land Market Impacts of the Endangered Species Act

Eyal G. Frank, Maximilian Auffhammer, David McLaughlin, Elisheba Spiller and David L. Sunding

No 33352, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Protecting species’ habitats is the main policy tool employed across the globe to reduce biodiversity losses. These protections are hypothesized to conflict with private landowners’ interests. We study the economic consequences of the most extensive and controversial piece of such environmental legislation in US history—the Endangered Species Act (ESA) of 1973. We assemble the most comprehensive data on species conservation efforts, land transactions, and building permits to date. By comparing parcels with identical histories of protections we show that, on average, the ESA shifts transactions from inside to outside of the protected area and leads to a slight appreciation in residential and vacant land values outside of critical habitats. We also show that the federal regulator determines borders for areas with the most stringent protections to avoid large effects on land values, only where it is explicitly allowed to take economic criteria into account. These average findings mask significant heterogeneity at the species and location level, which we document. Furthermore, we find no evidence of the ESA affecting building activity as measured by construction permits. Overall, even taking into account species-level heterogeneity, the number of possibly negatively affected parcels is extremely small. This suggests that the capitalization of the economic impacts of the ESA through the land market channel are likely minor, despite potential delays to development through permitting, for which we provide suggestive evidence. Our findings do not rule out economically significant impacts in a few highly constrained land markets with ESA protections amplified by local regulatory action.

JEL-codes: Q24 Q28 Q57 Q58 (search for similar items in EconPapers)
Date: 2025-01
New Economics Papers: this item is included in nep-agr and nep-env
Note: EEE
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