Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 9/2016: How do land markets anticipate regulatory change? Evidence from Canadian Conservation policy.

Branko Boskovic () and Linda Nøstbakken ()
Additional contact information
Branko Boskovic: University of Alberta, Postal: Alberta School of Business, University of Alberta, 3-23 Business Building, Edmonton, Alberta T6G 2R6,, Canada
Linda Nøstbakken: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: Regulation often evolves, and affected consumers or firms may adjust their behavior in anticipation of potential changes to regulation. Using shifting land use regulation boundaries and oil lease prices from Canada, we estimate the effect of anticipated regulatory change on the value of land. We find that anticipated rezoning decreases the price of unregulated leases. Based on our estimates, not accounting for anticipation underestimates the total cost of the regulation by nearly one-third. Overall, the evidence suggests that anticipation effects are significant and that the cost of anticipated regulation is capitalized into land values.

Keywords: Regulation; anticipation; land values; zoning; oil leases; endangered species.

JEL-codes: D44; Q30; Q52; Q58

38 pages, First version: June 27, 2016. Revised: August 17, 2016.

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