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Abstract for:

Game of Zones: The Economics of Conservation Areas

Gabriel M.  Ahlfeldt,  Kristoffer  Moeller,  Sevrin  Waights,  Nicolai  Wendland,  September 2013
Paper No' SERCDP0143: | Full paper (pdf)
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Keywords: Designation, difference-in-difference, RDD-DD, England, gentrification, heritage, property value

JEL Classification: H23; H31; R40; R58

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: SERC Discussion Papers
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Provided there are positive external benefits attached to the historic character of buildings, owners of properties in designated conservation areas benefit from a reduction in uncertainty regarding the future of their area. At the same time, the restrictions put in place to ensure the preservation of the historic character limit the degree to which properties can be altered and thus impose a cost to their owners. We test a simple theory of the designation process in which we postulate that the optimal level of designation is chosen so as to Pareto-maximize the welfare of local owners. The implication of the model is that a) an increase in preferences for historic character should increase the likelihood of a designation, and b) new designations at the margin should not be associated with significant house price capitalization effects. Our empirical results are in line with these expectations.