Economic Analysis of Taking Rules: The Bilateral Case

25 Pages Posted: 27 Dec 2011

See all articles by Daniel Göller

Daniel Göller

University of Agder - Department of Economics and Finance, School of Business and Law

Michael Hewer

University of Bonn

Multiple version iconThere are 2 versions of this paper

Date Written: December 22, 2011

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 amounts to the hypothetical value of the landowner's property had she invested efficiently. In contrast, under a government that maximizes social welfare, the only regime to induce the first best grants as compensation the social benefit of the taking. Consequently, if the government can only raise capital up to a certain amount, society may be better off under a non-benevolent government.

Keywords: Compensation for takings, eminent domain, moral hazard

JEL Classification: K11, R52, Q24

Suggested Citation

Göller, Daniel and Hewer, Michael, Economic Analysis of Taking Rules: The Bilateral Case (December 22, 2011). Available at SSRN: https://ssrn.com/abstract=1975835 or http://dx.doi.org/10.2139/ssrn.1975835

Daniel Göller

University of Agder - Department of Economics and Finance, School of Business and Law ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

Michael Hewer (Contact Author)

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

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