The Economic Impact of Critical-Habitat Designation: Evidence from Vacant-Land Transactions

The Endangered Species Act requires the federal government to designate critical habitat for species listed as threatened or endangered. This provision has proven to be one of its most controversial, as it entails special management and potentially greater regulation. We measure the economic impact of critical-habitat designation by estimating its effect on the market value of vacant land. Using data from 13,000+ transactions that occurred within or near critical habitat for two species in California, we show that it resulted in a large and statistically significant decrease in land value, with the largest decreases occurring within urban growth boundaries.