Business Formation in the Wake of States' Responses to Kelo
Journal of Accounting and Finance, Vol. 13(5), 2013
Posted: 24 Aug 2013
Date Written: May 22, 2013
The U.S. Supreme Court ruling in Kelo v. New London (2005) allows governments to take private property for transfer to new private owners to promote “economic development.” Our theoretical model shows that business creation can be encouraged, unaffected, or discouraged as the probability of takings increases, depending on the level of compensation and the owners' public use benefits. Empirical results indicate that states can pass laws protecting property rights without fear of retarding business formation, so long as compensation is economically fair. We explain why Kelo and these laws do not measurably affect business formation in our empirical work.
Keywords: Kelo, eminent domain, Business Formation
JEL Classification: K11
Suggested Citation: Suggested Citation