How Much Does Anticipation Matter? Evidence from Anticipated Regulation and Land Prices

54 Pages Posted: 9 Apr 2018

See all articles by Branko Bošković

Branko Bošković

University of Alberta - Department of Marketing, Business Economics & Law

Linda Nøstbakken

Norwegian School of Economics (NHH) - Department of Economics

Date Written: February 15, 2018

Abstract

Land prices across administrative boundaries can be useful for estimating the causal effects of local policy. Market anticipation about potential boundary changes can confound identification, so studies often avoid markets where this may arise. We develop an approach to quantify anticipation by separately identifying the causal effect of local policy and the market's subjective beliefs that administrative boundaries will change. Using land prices and changes to land use regulation boundaries, our estimates indicate that anticipation does matter quantitatively: it increases the welfare cost of the policy by one-quarter and empirical analysis that omits anticipation underestimates this cost by nearly one-half.

Keywords: anticipation, local policy, land values, regulation, border discontinuity

JEL Classification: D840, L500, R300

Suggested Citation

Bošković, Branko and Nøstbakken, Linda, How Much Does Anticipation Matter? Evidence from Anticipated Regulation and Land Prices (February 15, 2018). CESifo Working Paper Series No. 6888, Available at SSRN: https://ssrn.com/abstract=3157479

Branko Bošković

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada

Linda Nøstbakken (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47-55959134 (Phone)

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