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The Economics Of Compensating Property Owners

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  • RICHARD L. STROUP

Abstract

Using command‐and‐control regulation of land use to produce a public good (as opposed to preventing physical off‐property harms) without compensating the landowner can be expected to produce two unintended consequences: (i) management actions by landowners to reduce the land's attractiveness for production of the public good being sought and (ii) regulatory decisions made as though more costly regulation were costless. Higher costs imposed by the second consequence feed back to worsen the first. Examples from enforcement of current Endangered Species Act regulations provide illustrations. The paper uses a graphical framework to emphasize the qualitative difference between regulatory control without compensation on one hand and the rental or purchase of results on the other. Some low‐cost, highly successful habitat preservation programs utilizing voluntary action would be more difficult to sustain if the habitat were for listed species under the current ESA.

Suggested Citation

  • Richard L. Stroup, 1997. "The Economics Of Compensating Property Owners," Contemporary Economic Policy, Western Economic Association International, vol. 15(4), pages 55-65, October.
    • Handle: RePEc:bla:coecpo:v:15:y:1997:i:4:p:55-65
    DOI: 10.1111/j.1465-7287.1997.tb00489.x
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    References listed on IDEAS

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    1. Peter J. Hill, 1992. "Environmental Problems under Socialism," Cato Journal, Cato Journal, Cato Institute, vol. 12(2), pages 321-335, Fall.
    2. Thomas J. Miceli & Segerson Kathleen, 1995. "Government Regulation and Compensation for Takings: Implications for Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(5), pages 1177-1182.
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    Cited by:

    1. Winfree, Jason A. & McCluskey, Jill J., 2007. "Takings of development rights with asymmetric information and an endogenous probability of an externality," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 320-333, November.
    2. Kim, Chung-Ho & Kim, Kyung-Hwan, 2002. "Compensation for Regulatory Takings in the Virtual Absence of Constitutional Provision: The Case of Korea," Journal of Housing Economics, Elsevier, vol. 11(2), pages 108-124, June.
    3. Berrens, Robert P. & McKee, Michael & Farmer, Michael C., 1999. "Incorporating distributional considerations in the safe minimum standard approach: endangered species and local impacts," Ecological Economics, Elsevier, vol. 30(3), pages 461-474, September.
    4. Robert Innes & George Frisvold, 2009. "The Economics of Endangered Species," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 485-512, September.
    5. Philippe Barla & Joseph A. Doucet & Jean-Daniel M. Saphores, 2000. "Protection des habitats d'espèces menacées en terres privée: analyse d'instruments et de la politique canadienne," Canadian Public Policy, University of Toronto Press, vol. 26(1), pages 95-110, March.
    6. Huennemeyer, Anne-Juliane & McKitrick, Ross & Rollins, Kimberly S., 1999. "Optimal Compensation For Endangered Species Protection Under Asymmetric Information," 1999 Annual meeting, August 8-11, Nashville, TN 21693, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Casey B. Mulligan, 2015. "In-Kind Taxes, Behavior, and Comparative Advantage," NBER Working Papers 21586, National Bureau of Economic Research, Inc.

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