DP15780 The political economy of coastal development

Author(s): Pierre Magontier, Albert Sole-Olle, Elisabet Viladecans-Marsal
Publication Date: February 2021
Keyword(s): land-use policy, Local government, Regression Discontinuity
JEL(s): D72, H70, R52
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15780

We study the role of intergovernmental cooperation in protecting coastal land from development in Spain. Curbing the development of coastal land may generate benefits (e.g., preservation of environmental amenities and reduced tourist congestion) and costs (e.g., job losses), not only for residents in the political jurisdiction, but also for non-residents. Local governments may therefore make decisions in isolation that do not take account of the welfare of non-residents and may not choose the right amount of development. In this paper we investigate how political alignment between the mayors of neighboring municipalities may enhance incentives to cooperate and affect development in coastal areas. Using a regression discontinuity design and high-quality administrative data from the cadaster on the amount of built-up land along the Spanish coast, we found that municipalities with mayors belonging to the ideological bloc governing a majority of municipalities in a coastal area develop less land than other municipalities. This effect is larger for land very close to the coast and in municipalities with a higher share of environmentally valuable land.