THE ECONOMIC VALUE OF PROTECTING INVENTORIED ROADLESS AREAS: A SPATIAL HEDONIC PRICE STUDY IN NEW MEXICO

"The objective of this paper is to examine the off-site benefits, as capitalized into housing values, of protecting 1.6 million acres of Inventoried Roadless Areas (IRAs) in the state of New Mexico, United States. In light of petitions filed by various U.S. states to maintain the status of IRAs as roadless lands, spatial hedonic price models are estimated and used to calculate the implicit value of IRAs in New Mexico. Findings show that a two-stage least squares (2-SLS), robust spatial-lag model is the most appropriate econometric representation of the hedonic price function, and that IRA lands are a significant and positive determinant of house value. After controlling for the presence of Wilderness Areas (WAs) and other characteristics, results indicate that, on average, there is a 5.6% gain in the property value of a house from being located in, or adjacent to, a Census tract with IRAs. In the aggregate, this gain represents 3.5% of the value of all owner-occupied units in New Mexico ($1.9 billion in capitalized value, or an annualized value in perpetuity of $95 million, assuming a 5% interest rate)." ("JEL" R22, H40, Q51, C21) Copyright (c) 2010 Western Economic Association International.