26 Pages Posted: 6 Dec 2005
To assess compensation for regulation-induced "takings," we model political support for regulation as a function of externalities, landowner wealth, and tax burdens. When competing social interests have equal influence on political outcomes compensation should not be paid. However, when environmentalists and property owners have unequal influence the model yields several counterintuitive implications. For example, disenfranchised environmentalists should support takings compensation, since it reduces landowner opposition to regulation. We also show how compensation rules can limit the deadweight social costs of income transfers, while recognizing their effects on regulator and landowner behavior.
Keywords: regulatory takings, compensation, political economy
JEL Classification: K11, D72, L51
Suggested Citation: Suggested Citation
Brennan, Tim and Boyd, James, Political Economy and the Efficiency of Compensation for Takings. Contemporary Economic Policy, Vol. 24, 2005. Available at SSRN: https://ssrn.com/abstract=867108
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