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Optimal Compensation for Regulatory Takings

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  • Paul Pecorino

Abstract

I develop a model in which there are two groups in society, one of which bears all the costs of a regulation that provides (potentially unequal) benefits to both groups. Absent compensation, a biased government will not choose the efficient level of regulation. If taxes are nondistorting, a compensation rule can be designed to achieve the first best outcome. The optimal rule always involves a positive degree of compensation regardless of the direction of the government bias. When taxes are distortionary, the first best outcome cannot be achieved, and the optimal level of compensation may be zero. Copyright 2011, Oxford University Press.

Suggested Citation

  • Paul Pecorino, 2011. "Optimal Compensation for Regulatory Takings," American Law and Economics Review, Oxford University Press, vol. 13(1), pages 269-289.
    • Handle: RePEc:oup:amlawe:v:13:y:2011:i:1:p:269-289
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    File URL: http://hdl.handle.net/10.1093/aler/ahq027
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    Cited by:

    1. Hans-Bernd Schäfer & Ram Singh, 2018. "Takings of Land by Self-Interested Governments: Economic Analysis of Eminent Domain," Journal of Law and Economics, University of Chicago Press, vol. 61(3), pages 427-459.
    2. Ronit Levine-Schnur & Gideon Parchomovsky, 2016. "Is the Government Fiscally Blind? An Empirical Examination of the Effect of the Compensation Requirement on Eminent-Domain Exercises," The Journal of Legal Studies, University of Chicago Press, vol. 45(2), pages 437-469.
    3. Paul Pecorino, 2013. "Compensation for Regulatory Takings with a Redistributive Government," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 488-501, October.
    4. Thomas Koch & Javier Birchenall, 2016. "Taking versus taxing: an analysis of conscription in a private information economy," Public Choice, Springer, vol. 167(3), pages 177-199, June.

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