Environmental Regulation and the Spatial Distribution of Capital and Resources

This paper explores the impact of the Endangered Species Act on the profits of firms in the paper and pulp industries. In 1989, the federal courts enjoined timber-cutting contracts in old-growth forest areas that might contain northern spotted owl. This action was perceived to decrease substantially the profits of firms with a high spatial concentration of mills in the Northwest. The empirical evidence does not support this hypothesis. These same firms are shown to benefit from the environmental regulation because the value of privately held timber increased in the Northwest.