Working Paper: NBER ID: w12777
Authors: John A. List; Michael Margolis; Daniel E. Osgood
Abstract: We develop theory and present a suite of theoretically consistent empirical measures to explore the extent to which market intervention inadvertently alters resource allocation in a sequentialmove principal/agent game. We showcase our approach empirically by exploring the extent to which the U.S. Endangered Species Act has altered land development patterns. We report evidence indicating significant acceleration of development directly after each of several events deemed likely to raise fears among owners of habitat land. Our preferred estimate suggests an overall acceleration of land development by roughly one year. We also find from complementary hedonic regression models that habitat parcels declined in value when the habitat map was published, which is consistent with our estimates of the degree of preemption. These results have clear implications for policymakers, who continue to discuss alternative regulatory frameworks for species preservation. More generally, our modeling strategies can be widely applied -- from any particular economic environment that has a sequential-move nature to the narrower case of the political economy of regulation.
Keywords: decision-making under risk and uncertainty; land use; preemption; endangered species act
JEL Codes: H23; H41; Q27
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Publication of habitat map (Y91) | Decline in value of habitat parcels (Q15) |
| Critical Habitat (CH) (Q57) | Preemptive acceleration of land development (R52) |
| Critical Habitat (CH) (Q57) | Timing of permit applications (C41) |
| Endangered Species Act (ESA) (Q57) | Decline in value of habitat parcels (Q15) |