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Economic Analysis of Taking Rules: The Bilateral Investment Case

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  • Daniel Göller
  • Michael Hewer

Abstract

Our analysis focuses on a situation where a landowner and the government invest prior to the government's taking decision. When the government suffers from budgetary fiscal illusion, optimal compensation equals the hypothetical value of the landowner's property had she invested efficiently. In contrast, under a government that maximizes social welfare, this regime may fail to induce the first best. This insight stands in contrast to the literature, e.g., Miceli (1991), where this regime has been shown to induce the socially optimal solution.

Suggested Citation

  • Daniel Göller & Michael Hewer, 2014. "Economic Analysis of Taking Rules: The Bilateral Investment Case," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(3), pages 520-536, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201409)170:3_520:eaotrt_2.0.tx_2-g
    DOI: 10.1628/093245613X13958185385442
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    References listed on IDEAS

    as
    1. Nosal, Ed, 2001. "The taking of land: market value compensation should be paid," Journal of Public Economics, Elsevier, vol. 82(3), pages 431-443, December.
    2. Hermalin, Benjamin E, 1995. "An Economic Analysis of Takings," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 64-86, April.
    3. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    4. Cohen, Lloyd, 1991. "Holdouts and Free Riders," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 351-362, June.
    5. Munch, Patricia, 1976. "An Economic Analysis of Eminent Domain," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 473-497, June.
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    Citations

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    Cited by:

    1. Hans-Bernd Schäfer & Ram Singh, 2018. "Takings of Land by Self-Interested Governments: Economic Analysis of Eminent Domain," Journal of Law and Economics, University of Chicago Press, vol. 61(3), pages 427-459.
    2. Schweizer, Urs, 2016. "Efficient incentives from obligation law and the compensation principle," International Review of Law and Economics, Elsevier, vol. 45(C), pages 54-62.
    3. Ronit Levine-Schnur & Gideon Parchomovsky, 2016. "Is the Government Fiscally Blind? An Empirical Examination of the Effect of the Compensation Requirement on Eminent-Domain Exercises," The Journal of Legal Studies, University of Chicago Press, vol. 45(2), pages 437-469.

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    More about this item

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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