The Ground for Negotiation: Zoning for Risk Reduction around Hazardous Plants
32 Pages Posted: 8 Jun 2014 Last revised: 24 Nov 2019
Date Written: November 19, 2019
The industrialists are liable for any damage they cause to neighboring households. Consequently, households do not have to pay for the risk they create by locating in exposed areas. A common and efficient self-insurance strategy for the firm is to freeze land, or to negotiate land-use restrictions. When people understand only simple messages about risk, the boundaries of the building zone are the ground for negotiation with the mayor. Typical scenarios regarding the distribution of bargaining power between the firm and the mayor are examined. In the comparative statics, we show how red zones are revised as technology or demography change. Further, we give the conditions for a purple zone (limit red zone as the population grows) and a green zone (limit inhabitable zone as the risk grows) to exist.
Keywords: industrial disasters, land-use regulation, land-use negotiation, climate change
JEL Classification: R52, Q53, Q54, Q56
Suggested Citation: Suggested Citation