Spatial Arrangements of Externality Generating and Receiving Activities

Alexander E. Saak
November 2003  [03-WP 348]

Many cases of externalities in agricultural production such as pesticide drift, cross-pollination, and offensive odors are attributable to the incompatibility of neighboring land uses. This paper offers an examination of when an efficient activity arrangement is compatible with free-market incentives. Also, free-market and socially efficient activity arrangements are characterized in terms of spatial concentration of the externality generating uses.

Keywords: externality, graph partitioning, land-use arrangement, spatial concentration.

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