Of Multipliers and Market Value: Just Compensation in a Post-Kelo World

Abstract

In the wake of the US Supreme Court decision in Kelo v. The City of New London, several state passed regulation increasing the statutory compensation for eminent domain takings. Some of the increases were based on multipliers of market value, yet there has been little attempt to provide an economic justification for the magnitude of the multipliers. In this note, I propose a mechanism to compensate property owners at the average willingness-to-pay rather than the marginal willingness-to-pay.

Keywords: eminent domain, takings, just compensation, multiplier

JEL Classification: K11, R21, R52