Protected Areas and Municipality Finances: Evidence from France

Protected areas are one of the major tools used to conserve biodiversity, but their effectiveness is regularly questioned. One key concern is that municipalities might refrain from enrolling land into protected areas because it might be detrimental to economic activity. As a consequence, protected areas may be located in places where economic activity is low rather than where biodiversity is most threatened. We study the allocation of protected areas in France using a rich set of data on biodiversity, economic activity, tax potential of municipalities and socio-demographics. We first show that biodiversity is highly positively associated with protection, even conditional on economic activity, thereby softening the concerns that protected areas are unrelated to conservation objectives. We also uncover a major gap in tax potential between protected and unprotected areas conditional on biodiversity. We show that most of this gap is explained by variables measuring the intensity of economic activity. Finally, we find that socio-demographic and political variables do not explain the remaining gap. There are two possible explanations for our results: either protection kills economic activity, or areas are protected only where economic activity is not developed.