Political Economy and the Efficiency of Compensation for Takings
University of Maryland, Baltimore County - Department of Public Policy; Resources for the Future
Resources for the Future
Contemporary Economic Policy, Vol. 24, 2005
To assess compensation for regulation-induced "takings," we model political support for regulation as a function of externalities, landowner wealth, and tax burdens. When competing social interests have equal influence on political outcomes compensation should not be paid. However, when environmentalists and property owners have unequal influence the model yields several counterintuitive implications. For example, disenfranchised environmentalists should support takings compensation, since it reduces landowner opposition to regulation. We also show how compensation rules can limit the deadweight social costs of income transfers, while recognizing their effects on regulator and landowner behavior.
Number of Pages in PDF File: 26
Keywords: regulatory takings, compensation, political economy
JEL Classification: K11, D72, L51
Date posted: December 6, 2005
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