DP15780 The political economy of coastal development
Coastal amenities are common goods. When deciding on the amount of coastal development, local governments might not internalize the impact of their decision on non-residents' welfare. We contend that political alignment between neighboring local governments facilitates cooperation, helping restrain coastal overdevelopment. We leverage causal effects by applying a close-elections Regression Discontinuity Design to the universe of buildings in Spain. We find that municipalities with mayors belonging to the party controlling most municipalities in the same coastal area develop 32% less land than politically isolated municipalities. We also show that politically homogeneous coastal areas
develop less than their fragmented counterparts. Both effects are larger for land closest to shore and in municipalities and coastal areas with a large share of land included in nature preservation zones.