IDEAS home Printed from https://ideas.repec.org/p/cdl/agrebk/qt5x84h5kf.html
   My bibliography  Save this paper

Police-powers, regulatory takings and the efficient compensation of domestic and foreign investors

Author

Listed:
  • Aisbett, Emma
  • Karp, Larry
  • McAusland, Carol

Abstract

In customary international and public law, “takings” resulting from regulations designed to protect the public good are generally excluded from compensation rules; this exclusion is known as a police powers carve-out (PPCO). Increasingly, this PPCO is being challenged, particularly in international investment law. This paper analyzes the efficiency properties of a PPCO in a model with endogenous regulation, investment and entry. We design a one-parameter family of carve-out/compensation schemes that induce efficient regulation and firm level investment even when the regulator suffers fiscal illusion and the social benefit from regulation is private information to the regulator. We show that offering a carve-out reduces the subsidy to risky industry implicit in compensation rules; thus, a carve-out can mitigate the entry problem.

Suggested Citation

  • Aisbett, Emma & Karp, Larry & McAusland, Carol, 2008. "Police-powers, regulatory takings and the efficient compensation of domestic and foreign investors," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5x84h5kf, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt5x84h5kf
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/5x84h5kf.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert Innes & Stephen Polasky & John Tschirhart, 1998. "Takings, Compensation and Endangered Species Protection on Private Lands," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 35-52, Summer.
    2. 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.
    3. Timothy J. Brennan & James Boyd, 2006. "Political Economy And The Efficiency Of Compensation For Takings," Contemporary Economic Policy, Western Economic Association International, vol. 24(1), pages 188-202, January.
    4. Niemann, Paul & Shapiro, Perry, 2008. "Efficiency and fairness: Compensation for takings," International Review of Law and Economics, Elsevier, vol. 28(3), pages 157-165, September.
    5. Polinsky, A Mitchell, 1980. "Strict Liability vs. Negligence in a Market Setting," American Economic Review, American Economic Association, vol. 70(2), pages 363-367, May.
    6. Lawrence Blume & Daniel L. Rubinfeld & Perry Shapiro, 1984. "The Taking of Land: When Should Compensation Be Paid?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(1), pages 71-92.
    7. Shogren,Jason F. & Tschirhart,John (ed.), 2001. "Protecting Endangered Species in the United States," Cambridge Books, Cambridge University Press, number 9780521662109.
    8. Polinsky, A Mitchell & Shavell, Steven, 1992. "Enforcement Costs and the Optimal Magnitude and Probability of Fines," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 133-148, April.
    9. 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.
    10. Miceli, Thomas J & Segerson, Kathleen, 1994. "Regulatory Takings: When Should Compensation Be Paid?," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 749-776, June.
    11. A. Mitchell Polinsky, 1980. "Strict Liability versus Negligence in a Market Setting," NBER Working Papers 0420, National Bureau of Economic Research, Inc.
    12. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Guttorm Schjelderup & Frank Stähler, 2021. "Investor‐state dispute settlement and multinational firm behavior," Review of International Economics, Wiley Blackwell, vol. 29(4), pages 1013-1024, September.
    2. Horn, Henrik, 2018. "Investor-State vs. State-State Dispute Settlement," Working Paper Series 1248, Research Institute of Industrial Economics, revised 20 Feb 2019.
    3. Horn, Henrik & Tangerås, Thomas, 2016. "Economics and Politics of International Investment Agreements," Working Paper Series 1140, Research Institute of Industrial Economics.
    4. Kohler, Wilhelm & Stähler, Frank, 2019. "The economics of investor protection: ISDS versus national treatment," Journal of International Economics, Elsevier, vol. 121(C).
    5. Konrad, Kai A., 2017. "Large investors, regulatory taking and investor-state dispute settlement," European Economic Review, Elsevier, vol. 98(C), pages 341-353.
    6. Rod Falvey & Neil Foster-McGregor, 2017. "Heterogeneous effects of bilateral investment treaties," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(4), pages 631-656, November.
    7. Horn, Henrik & Norbäck, Pehr-Johan, 2018. "A Non-Technical Introduction to Economic Aspects of International Investment Agreements," Working Paper Series 1250, Research Institute of Industrial Economics.
    8. Aisbett, Emma & Busse, Matthias & Nunnenkamp, Peter, 2016. "Bilateral investment treaties do work: Until they don't," Kiel Working Papers 2021, Kiel Institute for the World Economy (IfW Kiel).
    9. Aisbett Emma & Karp Larry & McAusland Carol, 2010. "Compensation for Indirect Expropriation in International Investment Agreements: Implications of National Treatment and Rights to Invest," Journal of Globalization and Development, De Gruyter, vol. 1(2), pages 1-35, December.
    10. Horn, Henrik & Tangerås, Thomas, 2021. "Economics of international investment agreements," Journal of International Economics, Elsevier, vol. 131(C).
    11. Brada, Josef C. & Chen, Chunda & Jia, Jingyi & Kutan, Ali M. & Perez, M. Fabricio, 2022. "Value creation and value destruction in investor-state dispute arbitration," Journal of Multinational Financial Management, Elsevier, vol. 63(C).
    12. Emma Aisbett, 2010. "Powerful Multinational or Persecuted Foreigners: ‘Foreignness’ and Influence over Government," CEPR Discussion Papers 638, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    13. Ossa, Ralph & Staiger, Robert W. & Sykes, Alan O., 2023. "Standing in international investment and trade disputes," Journal of International Economics, Elsevier, vol. 145(C).
    14. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert Innes & George Frisvold, 2009. "The Economics of Endangered Species," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 485-512, September.
    2. Paul Pecorino, 2013. "Compensation for Regulatory Takings with a Redistributive Government," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 488-501, October.
    3. Thomas J. Miceli & Kathleen Segerson, 2011. "Regulatory Takings," Working papers 2011-16, University of Connecticut, Department of Economics.
    4. Lueck, Dean & Miceli, Thomas J., 2007. "Property Law," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 1, chapter 3, pages 183-257, Elsevier.
      • Dean Lueck & Thomas J. Miceli, 2004. "Property Law," Working papers 2004-04, University of Connecticut, Department of Economics.
    5. Brennan, Timothy & Boyd, James, 1996. "Pluralism and Regulatory Failure: When Should Takings Trigger Compensation?," RFF Working Paper Series dp-96-09, Resources for the Future.
    6. Frank Stähler, 2023. "An optimal investor-state dispute settlement mechanism," Journal of Economics, Springer, vol. 138(1), pages 1-16, January.
    7. 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.
    8. 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.
    9. Horn, Henrik & Tangerås, Thomas, 2016. "Economics and Politics of International Investment Agreements," Working Paper Series 1140, Research Institute of Industrial Economics.
    10. 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.
    11. Thomas J. Miceli, 2016. "The Cost of Kelo," Public Finance Review, , vol. 44(4), pages 500-522, July.
    12. Arnott, Richard & Hochman, Oded & Rausser, Gordon C., 2008. "Pollution and land use: Optimum and decentralization," Journal of Urban Economics, Elsevier, vol. 64(2), pages 390-407, September.
    13. Kevin Guerin, 2002. "Protection against Government Takings: Compensation for Regulation?," Treasury Working Paper Series 02/18, New Zealand Treasury.
    14. Ronald Giammarino & Ed Nosal, 2004. "Loggers vs. campers: compensation for the taking of property rights," Working Papers (Old Series) 0406, Federal Reserve Bank of Cleveland.
    15. Thomas J. Miceli & Kathleen Segerson, 2014. "Takings," Working papers 2014-17, University of Connecticut, Department of Economics.
    16. Miceli, Thomas J., 2008. "Public goods, taxes, and takings," International Review of Law and Economics, Elsevier, vol. 28(4), pages 287-293, December.
    17. De Maria, Marcello & Robinson, Elizabeth J.Z. & Zanello, Giacomo, 2023. "Fair compensation in large-scale land acquisitions: Fair or fail?," World Development, Elsevier, vol. 170(C).
    18. Stephen Polasky & Holly Doremus & Bruce Rettig, 1997. "Endangered Species Conservation On Private Land," Contemporary Economic Policy, Western Economic Association International, vol. 15(4), pages 66-76, October.
    19. Horn, Henrik & Tangerås, Thomas, 2021. "Economics of international investment agreements," Journal of International Economics, Elsevier, vol. 131(C).
    20. Polasky, Stephen & Costello, Christopher & Solow, Andrew, 2005. "The Economics of Biodiversity," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 29, pages 1517-1560, Elsevier.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:agrebk:qt5x84h5kf. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/dabrkus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.