Public goods, taxes, and takings
AbstractBlume, Rubinfeld, and Shapiro [Blume, L., Rubinfeld, D., & Shapiro, P. (1984). The taking of law: When should compensation be paid? Quarterly Journal of Economics, 99, 71-92] first showed that compensation for takings can lead to a moral hazard problem that results in overinvestment in land suitable for public use. To the contrary, this paper shows that when compensation is financed by a proportional property tax, the compensation rule is irrelevant regarding the level of investment landowners make in their property, as well as the amount of land they authorize the government to acquire, both of which will be efficient. Intuitively, landowners recognize the equivalence of taxes and takings in budgetary terms, causing the distortionary effects of compensation and property taxation to cancel each other out through the balanced budget condition.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Law and Economics.
Volume (Year): 28 (2008)
Issue (Month): 4 (December)
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Web page: http://www.elsevier.com/locate/irle
Compensation for takings Eminent domain Moral hazard Public goods;
Other versions of this item:
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
- R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
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