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Irreversible development and eminent domain: Compensation rules, land use and efficiency

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  • Turnbull, Geoffrey K.

Abstract

This paper examines the efficiency of eminent domain used to acquire green spaces, situations in which private investment permanently destroys the ecological externality value of land. The real option approach takes into account this irreversibility and changes established conclusions for the reversible investment case. Under irreversibility, eminent domain efficiency is more sensitive to compensation rules than previously thought. Setting compensation equal to what market value would be in the absence of eminent domain--the approach taken in the US and many other countries--reduces efficiency relative to losing the ecological externality to private development. Compensating at the market value under eminent domain threat increases efficiency, but not as much as compensation at social value does.

Suggested Citation

  • Turnbull, Geoffrey K., 2010. "Irreversible development and eminent domain: Compensation rules, land use and efficiency," Journal of Housing Economics, Elsevier, vol. 19(4), pages 243-254, December.
    • Handle: RePEc:eee:jhouse:v:19:y:2010:i:4:p:243-254
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    References listed on IDEAS

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    Cited by:

    1. Lewis Evans & Graeme Guthrie & Neil Quigley, 2012. "Contemporary Microeconomic Foundations for the Structure and Management of the Public Sector," Treasury Working Paper Series 12/01, New Zealand Treasury.
    2. Aiping Wang & Weifen Lin & Bei Liu & Hui Wang & Hong Xu, 2021. "Does Smart City Construction Improve the Green Utilization Efficiency of Urban Land?," Land, MDPI, vol. 10(6), pages 1-18, June.
    3. Kitchens, Carl & Roomets, Alex, 2015. "Dealing with eminent domain," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 54(C), pages 22-31.
    4. Peng Wang & Zinan Shao & Jian Wang & Qun Wu, 2021. "The impact of land finance on urban land use efficiency: A panel threshold model for Chinese provinces," Growth and Change, Wiley Blackwell, vol. 52(1), pages 310-331, March.

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