The Red, the Purple, and the Green: Negotiated Zones Around Hazardous Plants
29 Pages Posted: 8 Jun 2014 Last revised: 21 Oct 2018
Date Written: September 30, 2018
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. To contain its liabilities, the firm can purchase or rent land, establishing an exclusion zone, also called a red zone. Typical scenarios regarding the distribution of bargaining power between the firm and the population are examined. We show that the red zone is increasing with the bargaining power of which side ultimately incurs the loss. We show how red zones are revised as technology, climate, 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