Is the Endangered Species Act Endangering Species?
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.
Correspondence to: John A. List, Professor, The University of Chicago, Department of Economics 1126 East 59th Street, Chicago, IL 60636; email: firstname.lastname@example.org Draft for discussion purposes only; these results are quite preliminary. Margolis: Escuela de Economia, Universidad de Guanajuato. Osgood: IRICP, The Earth Institute at Columbia University. Thanks are due to Amy Ando, Spencer Banzhaf, Dean Lueck, Robert Innes, Marc Nerlove, Steven Polasky, and David Wilcove for helpful comments, and to Alan Isaak and the American University Gauss archives for code to perform probit and logit estimations. Seminar participants at Harvard University, Princeton University, Resources for the Future, University of Texas-Austin, University of California-Berkeley, the NBER Summer Institute, and the 2005 ASSA meetings also provided useful comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.