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In this paper the nature, outcomes, and regional effects of conflicts over the municipal affiliation of industrial areas and large facilities in urban fringe and rural areas in Israel are examined, based on an analysis of sixty-seven conflicts that took place during the period 1961–93. It is demonstrated that the potential for conflicts has increased because of the growing dispersal of industry into rural space, the increasing reliance of local government on self-income, and unique Israeli circumstances. These conditions have encouraged two contradictory options for local government, both promoted by neoconservative free-market approaches. The first consists of a growing role for local government in economic development efforts, accompanied by intense competition among local authorities and by the establishment of voluntary modes of municipal cooperation in initiating and managing industrial areas. Cooperation is intended to achieve a just distribution of regional wealth and to promote the fiscal soundness of local government. The second option is to remove nodes of economic development from local government to local industrial councils and to free export processing zones, loosely controlled by the central government. These initiatives practically strip local government of its potential industrial base, with the intention of promoting national and regional economic growth. Reforms of the above types tend to originate in the periphery, where the flexibility to change existing structures is greater than in central regions. Despite this pioneering role of the periphery, the specific implications of these reforms for local autonomy and fiscal viability of local government in peripheral regions are, at best, mixed.
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