Quantifying the private costs of conservation policy in Paraguay

About

Deforestation restrictions on private lands are a common conservation policy in South America, but their costs and distributional impacts are largely unknown. Accurate assessments of the costs of such interventions are necessary to maximize their economic efficiency, cost-effectiveness, and equity. Most conservation policies, however, are developed in the absence of rigorous data on the scale of costs, or who bears those costs.

For policy-based conservation interventions such as deforestation restrictions, the most important costs are likely to be opportunity costs resulting from foregone resource extraction or land use change. These opportunity costs are not directly observable, so alternate methods are necessary to estimate how much conservation costs, and determine who bears those costs. We aim to derive these estimates using property value to generate empirically grounded estimates of the costs of conservation policies as well as the value of natural resources for forest parcels in Paraguay.

Approach

We are comparing the private market value for forests that are protected by regulations to the value of comparable forests that are not protected by conservation policy. We believe that the difference between these two values can reveal the private cost of land use restrictions. We use a combination of hedonic modelling and regression discontinuity design (RDD) to isolate the causal effect of land use regulations on forest land values to advance our understanding of the costs of conservation policies and the distribution of financial burden across diverse landholders.