Abstract
We study the problem of a central government that is to choose the optimal degree of decentralisation across regions for the decision mechanism concerning the final treatment of municipal solid waste. We analyze incentives, equilibria and implications of the governance framework for the disposal of waste. The key decisions revolve around the mobility of waste and the externalities (pollution) associated with its disposal, be it via incineration or landfill. Moreover, if the regions are characterized by different levels of efficiency in the processes they apply to the final treatment of waste, a certain degree of mobility across regions should allow to reap the benefits of higher efficiency. On the other hand, as transportation and other environmental costs implied by mobility and concentration become significant, a trade-off emerges. Our model evaluates the implications of that trade-off for the optimal degree of decentralization and mobility in waste management.