Government Expropriation Increases Economic Growth and Racial Inequality: Evidence from Eminent Domain
TSE Working Paper No. 16-693
80 Pages Posted: 31 May 2017 Last revised: 25 Dec 2018
Date Written: November 19, 2018
Do legal institutions affect growth and inequality? Hold-up problems among numerous property right holders stymie growth, while secure property rights motivate investment and expropriating from the poor spurs inequality. Using novel geo-coded data on all government takings appellate precedent from 1950-2008 and randomly assigned judges, we find that pro-takings precedents spurred economic growth, especially in construction, transportation, and government sectors, and also increased land expropriation, highway construction, and property values, but displaced non-whites to public housing and unemployment. Pro-regulatory takings precedent likewise spurred economic growth and property values, but did not displace non-whites nor increase racial inequality. We build a model that embeds existing theories of government takings power affecting underinvestment, overinvestment, and economic growth to interpret these results.
Keywords: property rights, displacement, regulation, takings
JEL Classification: R38, K11, R52
Suggested Citation: Suggested Citation