University of Helsinki
Abstract: This document examines regions which employ labor and land in production, improve their productivity by devoting labor to R&D and promote biodiversity by conserving land from production. There is a self-interested central planner that is prone to lobbying and (i) dictates the regions to increase their area of conserved land in uniform proportion or (ii) sets a non-distorting uniform subsidy to conserved land. Comparing (i) and (ii) yields
following results. Regulation (i) promotes biodiversity and welfare. The replacement of regulation (i) by the subsidy (ii) decreases welfare. Applied to NATURA 2000 in the EU, this suggests that regulation is the appropriate authority for the Commission.
Presented in Conference on “Structural Change, Dynamics, and Economic Growth”