Public Development of Industrial Estates in the Netherlands: Undesired Market Outcomes and Policy Interventions

The Dutch market for industrial estates is dominated by municipalities who have always felt responsible for supplying sufficient industrial sites at all times. As a result, a number of undesired market outcomes have occurred in this market, including oversupply of land and a high rate of deteriorating industrial estates. Policy interventions have been announced that must improve market outcomes. This paper analyses those undesired market outcomes and compares them with development processes in other European countries. We will argue that the effectiveness of the present set of interventions – all meant to adjust the present institutional order – can be improved, when they are accompanied by interventions meant to restructure this institutional order. The latter set of interventions, based on recent Coasian planning literature, includes the pricing of externalities, reduction of the rights of municipalities to develop industrial estates and a change of the conditions in industrial properties tenancy contracts.