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Eminent Domain Versus Government Purchase of Land Given Imperpect Information About Owners' Valuation

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  • Steven Shavell

Abstract

Governments employ two basic policies for acquiring land: taking it through exercise of their power of eminent domain; and purchasing it. The social desirability of these two policies is compared in a model in which the government's information about landowners' valuations is imperfect. Under this assumption, the policy of purchase possesses the market test advantage that the government obtains land only if an owner's valuation is low enough that he is willing to sell it. However, the policy suffers from a drawback when the land that the government needs is owned by many parties. In that case, the government's acquisition will fail if any of the owners refuses to sell. Hence, the policy of eminent domain becomes appealing if the number of owners of the land is large. This conclusion holds regardless of whether the land that the government seeks is a parcel at a fixed location or instead may be located anywhere in a region.

Suggested Citation

  • Steven Shavell, 2007. "Eminent Domain Versus Government Purchase of Land Given Imperpect Information About Owners' Valuation," NBER Working Papers 13564, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13564
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    References listed on IDEAS

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    1. Thomas J. Miceli & Kathleen Segerson, 2007. "A Bargaining Model of Holdouts and Takings," American Law and Economics Review, American Law and Economics Association, vol. 9(1), pages 160-174.
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    3. Flavio Menezes & Rohan Pitchford, 2004. "A model of seller holdout," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(2), pages 231-253, August.
    4. George J. Mailath & Andrew Postlewaite, 1990. "Asymmetric Information Bargaining Problems with Many Agents," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 351-367.
    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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    Cited by:

    1. Miceli, Thomas J. & Segerson, Kathleen & Sirmans, C.F., 2008. "Tax Motivated Takings," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(4), pages 579-591, December.

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    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • H1 - Public Economics - - Structure and Scope of Government
    • H4 - Public Economics - - Publicly Provided Goods
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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