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Loggers versus Campers: Compensation for the Taking of Property Rights

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  • Ron Giammarino
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    Abstract

    Governments often have the power to take property rights from private citizens but their responsibility to pay compensation is typically not well specified. In this article we examine how the compensation rule adopted by a country affects both private investment decisions and takings decisions. We build on a widely accepted argument that any lump sum compensation, including zero, is the socially optimal compensation scheme. The lump sum compensation result hinges critically on the assumptions that the government maximizes social welfare and that the level of private investment does not affect the alternative use of the property rights. We find that when either of these assumptions are relaxed, the optimal compensation scheme will generally depend upon market values. The model presented here provides strong support for market value compensation for the taking of property rights in modern societies. Copyright 2005, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1093/jleo/ewi006
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    Bibliographic Info

    Article provided by Oxford University Press in its journal The Journal of Law, Economics, and Organization.

    Volume (Year): 21 (2005)
    Issue (Month): 1 (April)
    Pages: 136-152

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    Handle: RePEc:oup:jleorg:v:21:y:2005:i:1:p:136-152

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    Cited by:
    1. Thomas J. Miceli & Kathleen Segerson, 2011. "Regulatory Takings," Working papers 2011-16, University of Connecticut, Department of Economics.
    2. Deininger, Klaus W. & Jin, Songqing, 2006. "Securing property rights in transition: Lessons from implementation of China's rural land contracting law," 2006 Annual meeting, July 23-26, Long Beach, CA 21465, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Paul Klumpes, 2013. "Audit fee pricing and internationally-credible GAAP: a property rights analysis," European Journal of Law and Economics, Springer, vol. 35(1), pages 21-39, February.
    4. Winfree, Jason A. & McCluskey, Jill J., 2007. "Takings of development rights with asymmetric information and an endogenous probability of an externality," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 320-333, November.

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