NIMBY and mechanism design under different constitutional constraints

This paper analyzes, in a simple two-region model, the undertaking of noxious facilities when the central government has limited prerogatives. The central government decides whether to construct a noxious facility in one of the regions, and how to finance it. We study this problem under both full and asymmetric information on the damage caused by the noxious facility in the host region. We particularly emphasize the role of the central government prerogatives on the optimal allocations. We finally discuss our results with respect to the previous literature on NIMBY and argue that taking into account these limited prerogatives is indeed important.