Growth Under the Shadow of Expropriation? The Economic Impacts of Eminent Domain
87 Pages Posted: 10 May 2023
Is it justified for states to appropriate private property rights? If so, should governments regulate or expropriate? Competing models predict that government power of appropriation causes underinvestment, overinvestment, and growth. We use random assignment of U.S. federal court judges setting geographically-local precedent to document all three mechanisms. Government power increased expropriation, highway construction, property values, and growth, especially in government, transportation, and construction as well as agriculture, retail, and financial sectors, but increased displacement of racial minorities, who became more likely to be unemployed and live in public housing. These results are consistent with minority Democrat judges being more likely to strike down government expropriations while Republican former federal prosecutors being more likely to uphold them. However, government power to regulate did not increase displacement or racial inequality, while spurring growth and property values, suggesting that regulation relative to expropriation may be more Pareto improving.
Keywords: Property rights, displacement, Regulation, takings
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