Eminent Domain Versus Government Purchase of Land Given Imperpect Information About Owners' Valuation
AbstractGovernments employ two basic policies for acquiring land: taking it through exercise of their power of eminent domain; and purchasing it. The social desirability of these two policies is compared in a model in which the government's information about landowners' valuations is imperfect. Under this assumption, the policy of purchase possesses the market test advantage that the government obtains land only if an owner's valuation is low enough that he is willing to sell it. However, the policy suffers from a drawback when the land that the government needs is owned by many parties. In that case, the government's acquisition will fail if any of the owners refuses to sell. Hence, the policy of eminent domain becomes appealing if the number of owners of the land is large. This conclusion holds regardless of whether the land that the government seeks is a parcel at a fixed location or instead may be located anywhere in a region.
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Date of creation: Oct 2007
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Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- H1 - Public Economics - - Structure and Scope of Government
- H4 - Public Economics - - Publicly Provided Goods
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
This paper has been announced in the following NEP Reports:
- NEP-AGR-2007-11-03 (Agricultural Economics)
- NEP-ALL-2007-11-03 (All new papers)
- NEP-LAW-2007-11-03 (Law & Economics)
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