Siting Noxious Facilities : Efficiency in Majority Rule Decisions

This paper analyzes the inefficiency of majority-rule decisions in making siting decisions for noxious facilities, such as waste treatment facilities, landfills, or nuclear waste repositories. In particular, we demonstrate in a general context that a majority-rule voting process will lead a locality to make a decision that decreases aggregate welfare. We develop a theoretical model to establish the prevalence of inefficiencies, demonstrate the mechanisms that exacerbate or mitigate inefficiencies, and provide a feasible solution. The model illustrates the roles that population distribution and the nature of disamenity costs play in creating welfare-decreasing outcomes. We use observed population distributions to estimate model parameters and measure the magnitude of possible inefficiencies in 118 US counties. Results suggest potentially large welfare losses are likely to arise with majority-rule decisions.