On A Political Solution to the NIMBY Conflict

Abstract

Scale economy in the construction and operation of public facilities, such as landfills, calls for cooperation among communities to build a common facility (Arthur O’Sullivan, 1993). Such a facility is a mixture of a public good and a private bad and, hence, leads to strong opposition by communities to locate it in their vicinity (Bruno S. Frey et al., 1996). This is one of the most serious environmental concerns of recent years, and is known as NIMBY: “not in my backyard.” In this paper we study the hypothesis that a democratic political process creates an adequate mechanism for the resolution of the NIMBY conflict. The intuitive explanation is simple. A NIMBY conflict is likely to induce lobbying and symmetric pressures by all threatened communities in the relevant region. As is well known (Gene M. Grossman and Elhanan Helpman, 1994), when subject to symmetric pressures, politicians stick firmly to principles and function most efficiently. The existing literature on the siting of noxious facilities focuses mainly on normative issues, such as welfare-maximizing siting via decentralized community-based mechanisms (e.g., Howard Kunreuther and Paul R. Kleindorfer, 1986; Robert C. Mitchell and Richard T. Carson, 1986; and Deborah Minehart and Zvika Neeman, 2002). Evidently, however, such mechanisms have seldom been practiced (e.g., Stephen K. Swallow et al., 1992). The current study adopts a positive approach, integrating a political-economic framework with a model of a competitive real estate market. In the theoretical section, a government of a linear two-city economy determines the location of a noxious facility, which affects the equilibrium in the real estate market and induces the spatial distributions of price and population. The government is subject to political pressures by city-level lobbies of landowners (both landlords and home owners). In general, the political equilibrium and the socially optimal siting differ. However, the more equitable the distribution of landownership in the region, the smaller the difference. At the limit, when property distribution is perfectly equitable and all cities participate in the political arena, the government locates the facility at the socially optimal site. The analysis proceeds by identifying additional conditions under which the political equilibrium siting coincides with the socially optimal location and, with an empirical analysis. In the empirical section, the theoretical framework is extended to account for a multiple-city region, and is calibrated to assess the prospects of the political system for resolving the NIMBY conflict in the context of landfill-siting in Israel. It is shown that if all cities in the region form political lobbies and the politicians are not extremely corrupt, the political siting is close geographically to the socially optimal location, and the difference entails a less than 0.1 percent reduction in social welfare. Moreover, even if the formation of lobbying in the region is incomplete, as long as the weight the politicians assign to social welfare is larger than 0.7, the proximity of the politically and socially optimal locations is preserved. We interpret the above results as supportive of the hypothesis of an effective political solution to the NIMBY conflict.