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Habitat fragmentation is widely considered a primary threat to biodiversity. This paper develops a theoretical model of land use to analyze the optimal conservation of landscapes when land quality is spatially heterogeneous and wildlife habitat is fragmented and socially valuable. When agriculture is the primary cause of fragmentation, we show that reforestation efforts should be targeted to the most fragmented landscapes with an aggregate share of forest equal to a threshold, defined by the ratio of the opportunity cost of conversion to the social value of core forest. When urban development is the primary cause of fragmentation, we show how spatial heterogeneity in amenities and household neighbor preferences affect the optimal landscape and the design of land-use policies.
