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The role of compensation in siting hazardous facilities


  • Howard Kunreuther

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania)

  • Doug Easterling

    (University of Colorado, Boulder, Colorado)


Empirical evidence indicates that compensation can prove effective in gaining public acceptance for siting facilities on the benign end of the spectrum (e.g., landfills, prisons), but is subject to serious limitations when it comes to facilities that the public regards as particularly risky or of questionable legitimacy such as nuclear waste repositories. These facilities require creative mitigation measures such as independent inspections of the facility and local shutdown power. Even then they may be viewed as too risky to be acceptable with or without compensation. This article proposes a two-stage siting process which recognizes the importance of regulations and safety standards (Stage 1) while employing a voluntary process with compensation to address concerns with equity and efficiency (Stage 2).

Suggested Citation

  • Howard Kunreuther & Doug Easterling, 1996. "The role of compensation in siting hazardous facilities," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 15(4), pages 601-622.
  • Handle: RePEc:wly:jpamgt:v:15:y:1996:i:4:p:601-622 DOI: 10.1002/(SICI)1520-6688(199623)15:4<601::AID-PAM6>3.0.CO;2-L

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    References listed on IDEAS

    1. Douglas Easterling, 1992. "Fair rules for siting a high-level nuclear waste repository," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 11(3), pages 442-475.
    2. Kunreuther, Howard & Easterling, Douglas, 1990. "Are Risk-Benefit Tradeoffs Possible in Siting Hazardous Facilities?," American Economic Review, American Economic Association, vol. 80(2), pages 252-256, May.
    3. Elster, Jon, 1991. "Local justice : How institutions allocate scarce goods and necessary burdens," European Economic Review, Elsevier, vol. 35(2-3), pages 273-291, April.
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    Cited by:

    1. Stéphanie Souche & Charles Raux, 2006. "Perception of the fairness of pricing," Post-Print halshs-00109055, HAL.
    2. Amitrajeet Batabyal & Hamid Beladi, 2012. "A simple auction mechanism for locating noxious facilities," Letters in Spatial and Resource Sciences, Springer, vol. 5(1), pages 1-6, March.
    3. Robin R. Jenkins & Kelly B. Maguire & Cynthia L. Morgan, 2004. "Host Community Compensation and Municipal Solid Waste Landfills," Land Economics, University of Wisconsin Press, vol. 80(4).
    4. Shackley, Simon & Mander, Sarah & Reiche, Alexander, 2006. "Public perceptions of underground coal gasification in the United Kingdom," Energy Policy, Elsevier, vol. 34(18), pages 3423-3433, December.
    5. Vajjhala, Shalini P. & Fischbeck, Paul S., 2007. "Quantifying siting difficulty: A case study of US transmission line siting," Energy Policy, Elsevier, vol. 35(1), pages 650-671, January.
    6. Garrone, Paola & Groppi, Angelamaria, 2012. "Siting locally-unwanted facilities: What can be learnt from the location of Italian power plants," Energy Policy, Elsevier, vol. 45(C), pages 176-186.
    7. Laura Abrardi & Luca Colombo & Pier Angelo Mori, 2016. "Customer Ownership And Quality Provision In Public Services Under Asymmetric Information," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1499-1518, July.
    8. Amihai Glazer & Stef Proost, 2007. "Earmarking: Bundling to Signal Quality," Working Papers 060713, University of California-Irvine, Department of Economics.
    9. Naveed Paydara, Olga Schenk, Ashley Bowers, Sanya Carley, John Rupp and John D. Graham, 2016. "The Effect of Community Reinvestment Funds on Local Acceptance of Unconventional Gas Development," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    10. Martin Besfamille & Jean-Marie Lozachmeur, 2010. "NIMBY and mechanism design under different constitutional constraints," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(2), pages 114-132, April.
    11. Wenche Tobiasson & Tooraj Jamasb, 2014. "Sustainable Electricity Grid Development and the Public: An Economic Approach," Cambridge Working Papers in Economics 1432, Faculty of Economics, University of Cambridge.
    12. Francisco André & Francisco Velasco & Luis Gonzalez-Abril, 2009. "Intertemporal and spatial location of disposal facilities," Spanish Economic Review, Springer;Spanish Economic Association, vol. 11(1), pages 23-49, March.
    13. Michael J. Sandel, 2013. "Market Reasoning as Moral Reasoning: Why Economists Should Re-engage with Political Philosophy," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 121-140, Fall.
    14. Keith Waehrer, 2003. "Hazardous Facility Siting When Cost Information Is Private: An Application of Multidimensional Mechanism Design," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(4), pages 605-622, October.
    15. Charles Raux & Stéphanie Souche & Yves Croissant, 2009. "How fair is pricing perceived to be? An empirical study," Public Choice, Springer, vol. 139(1), pages 227-240, April.
    16. Euston Quah, 2005. "Pursuing Green Growth : Some Conflicts and Necessary Conditions for a Pragmatic Environmental Policy," Development Economics Working Papers 22573, East Asian Bureau of Economic Research.
    17. Lejano, Raul P. & Davos, Climis A., 2001. "Siting noxious facilities with victim compensation: : n-person games under transferable utility," Socio-Economic Planning Sciences, Elsevier, vol. 35(2), pages 109-124.
    18. Lejano, Raul P. & Davos, Climis A., 2002. "Fair Share: Siting Noxious Facilities as a Risk Distribution Game under Nontransferable Utility," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 251-266, March.
    19. O'Garra, Tanya & Mourato, Susana & Pearson, Peter, 2008. "Investigating attitudes to hydrogen refuelling facilities and the social cost to local residents," Energy Policy, Elsevier, vol. 36(6), pages 2074-2085, June.
    20. Richard Benjamin & Jeffrey Wagner, 2006. "Reconsidering the law and economics of low-level radioactive waste management," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 8(1), pages 33-53, December.
    21. García, Jorge H. & Cherry, Todd L. & Kallbekken, Steffen & Torvanger, Asbjørn, 2016. "Willingness to accept local wind energy development: Does the compensation mechanism matter?," Energy Policy, Elsevier, vol. 99(C), pages 165-173.

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