Intertemporal and Spatial Depletion of Landfills

Abstract

This paper generalizes Hotelling?s (1931) theory of nonrenewable resources to situations where resource pools and their users are distributed spatially. Extraction and transport costs are assumed to be linear in the rate of extraction, but utilization of each deposit may require a setup cost. While Herfindahl?s (1967) analysis of the socially optimal utilization of multiple deposits by a single user can be given a spatial reinterpretation, our contribution is to generalize his results further to the case where there are multiple users who are themselves spatially distributed. While our spatial generalization is important in many resource applications, it is essential to an understanding of solid waste problems. Landfill space may be regarded as a depletable resource, since space extracted today is unavailable tomorrow. But since cities and landfills are dispersed geographically, transshipment of waste commonly occurs within and between countries. Our analysis characterizes socially optimal waste flows over time and space and will facilitate the evaluation of the many government interventions designed to regulate such shipments of solid waste.

JEL Classification: Q32, Q38