The Politics of Spatial Policies

A wide variety of policies have spatially concentrated costs and diffuse benefits. In many cases, such policies exhibit severe governance failures. We present a formal model to investigate how these policy failures relate to institutions for resident participation. In the model, residents of two districts compete to oppose a locally costly (but socially beneficial) proposal. Participatory institutions allow residents to send a costly signal of their preferences to an official. But this signal produces inefficiencies in the regulatory process. The official only establishes participatory institutions when they are moderately biased toward one district. When extremely biased, the official unilaterally benefits one district at the other’s expense; when sufficiently egalitarian, the official allows each district to approve or veto projects themselves. We connect the establishment of participatory institutions to the changing structure of urban politics in the wake of the Great Society, reflecting both increased equality across neighborhoods and persistent inequality.