Economic Analysis of the Critical Habitat Designation Process for Endangered and Threatened Species Under the Endangered Species Act of 1973

Habitat destruction is the leading cause of biodiversity loss in the US. Under the Endangered Species Act (ESA), habitat deemed essential to endangered and threatened species recovery is proposed as critical habitat (CH). CH areas are subject to regulations that could alter land development plans or increase costs. The potential economic opportunity cost created by CH regulations may lead to the exclusion of land proposed for CH designation, thereby reducing the conservation benefits of the CH rule. In this paper, I use a unique dataset collected from Federal Register (FR) documents to estimate the reduction in CH acreage from proposed to final ruling, both on the extensive and intensive margin. I find a negative relationship between the level of household income in an area proposed for CH and the probability that a CH gains acreage or maintains acreage during the establishment process. I also find some evidence that higher household income in a CH area is associated with a greater relative loss in acreage between proposal and finalization. I also find that private land proposed for CH designation is less likely to be in the final designation than federal land. Overall, my results suggest that economic considerations influence CH allocation decisions. Whether reducing the amount of private land subject to CH designations is socially efficient depends on the unknown economic benefit of private land exclusions versus the cost of biodiversity and ecosystem service loss that may result from not protecting all land deemed vital to species recovery.