Abstract

Democracies find it difficult, and sometimes impossible to get through projects desired by a large share of the population because these are strongly opposed by local residents (NIMBY: Not In My BackYard). As a solution for these conflicts, economists proposed offering (monetary) compensation to the citizens of the host community. Experiences with many different projects and countries reveal, however, that monetary payments are incapable of solving the NIMBY-problem. A monetary offer to accept an otherwise undesired project undermines civic virtue. This crowding-out effect is empirically demonstrated using the search for a nuclear repository in Switzerland. A satisfactory strategy to overcome the NIMBY-problem takes into account the procedure, the time sequence, as well as the type of compensation offered.