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Is the Government Fiscally Blind? An Empirical Examination of the Effect of the Compensation Requirement on Eminent-Domain Exercises

Listed author(s):
  • Ronit Levine-Schnur
  • Gideon Parchomovsky
Registered author(s):

    We empirically test the fiscal-illusion hypothesis in the takings context in Israel. Israeli law allows local governments to expropriate up to 40 percent of any parcel without compensation. In 2001, the Israeli Supreme Court created a carve out for takings of 100 percent, requiring full compensation in such cases. We analyze data for 3,140 takings cases in Tel Aviv between 1990 and 2014. There was no disproportionate share of takings of just under 40 percent. Nor was there a long-term drop in the share of 100 percent takings after 2001. Although a short-term drop in the share of 100 percent takings followed the 2001 decision, the trend was later reversed, and the share of 100 percent takings surpassed the pre-2001 level. Our findings do not corroborate the fiscal-illusion hypothesis in its strict form. Rather, they lend qualified support to the hypothesis that takings practices are largely shaped by planning needs and fairness considerations.

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    File URL: http://dx.doi.org/10.1086/687248
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    File URL: http://dx.doi.org/10.1086/687248
    Download Restriction: Access to the online full text or PDF requires a subscription.

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    Article provided by University of Chicago Press in its journal The Journal of Legal Studies.

    Volume (Year): 45 (2016)
    Issue (Month): 2 ()
    Pages: 437-469

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    Handle: RePEc:ucp:jlstud:doi:10.1086/687248
    Contact details of provider: Web page: http://www.journals.uchicago.edu/JLS/

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    1. Emmanuel Saez, 2010. "Do Taxpayers Bunch at Kink Points?," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 180-212, August.
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    7. Ramnath, Shanthi, 2013. "Taxpayers' responses to tax-based incentives for retirement savings: Evidence from the Saver's Credit notch," Journal of Public Economics, Elsevier, vol. 101(C), pages 77-93.
    8. Rupert Sausgruber & Jean-Robert Tyran, 2005. "Testing the Mill hypothesis of fiscal illusion," Public Choice, Springer, vol. 122(1), pages 39-68, January.
    9. Oren Bar-Gill & Ariel Porat, 2014. "Harm–Benefit Interactions," American Law and Economics Review, Oxford University Press, vol. 16(1), pages 86-116.
    10. Lawrence Blume & Daniel L. Rubinfeld & Perry Shapiro, 1984. "The Taking of Land: When Should Compensation Be Paid?," The Quarterly Journal of Economics, Oxford University Press, vol. 99(1), pages 71-92.
    11. Daniel Göller & Michael Hewer, 2014. "Economic Analysis of Taking Rules: The Bilateral Investment Case," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(3), pages 520-536, September.
    12. Miceli, Thomas J., 1997. "Economics of the Law: Torts, Contracts, Property, Litigation," OUP Catalogue, Oxford University Press, number 9780195103908.
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