Unintended Effects of Environmental Policies: The Case of Urban Growth Controls and Agricultural Intensification

Abstract

When environmental policies do not control decision-making on all margins, they can have unintended effects on the environment. We examine effects of urban growth boundaries (UGBs) on agricultural intensification. A primary goal of a UGB is to preserve open space outside the boundary; however, by eliminating the future rent stream from development, UGBs encourage landowners to adopt more capital-intensive agricultural uses. We empirically estimate UGB effects on intensification rates in Ventura County, California. Difference-in-differences estimates reveal that UGBs increased intensification rates by 16–21 percentage points. In Ventura County, policies designed to preserve open space accelerated its loss and increased agricultural externalities