Adding realism to the Agglomeration Bonus: How endogenous land returns affect habitat fragmentation

Abstract

The Agglomeration Bonus has been shown to be a potentially successful policy to reunite fragmented habitat and increase conservation enrollment in laboratory testbed experiments. Yet, one key criticism has been that land prices have been assumed exogenous and fixed in these experiments. In the field, voluntary conservation enrollment by landowners will likely affect the value of the surrounding land. This endogeneity of land values suggests a discrepancy between results from laboratory experiments and true landowner decisions under a given policy. We address this concern by using an experimental design that accounts for the endogenous effect on surrounding land values from habitat conservation based on estimated returns from an actual landscape in eastern Wyoming as a case study. We show that without incorporating endogenous land values, traditional laboratory experiments likely will underestimate the amount of habitat fragmentation resulting from basic conservation policies without Agglomeration Bonuses. We also find that a low-cost Agglomeration Bonus can work to reunite this fragmented habitat, even under endogenous land value conditions. Our research indicates that through voluntary conservation decisions by private landowners, a more cost effective Bonus scheme can create contiguous habitat across privately held land, even when incorporating realistic endogenous land values.