Public Goods, Taxes, and Takings

Thomas Miceli

No 2007-02, Working papers from University of Connecticut, Department of Economics

Abstract: Blume, Rubinfeld, and Shapiro (1984) first showed that compensation for takings can lead to a moral hazard problem that results in overinvestment in land suitable for public use. To the contrary, this paper shows that the compensation rule is irrelevant regarding the level of investment landowners make in their property, as well as the amount of land they authorize the government to acquire, both of which will be efficient. Intuitively, landowners recognize the equivalence of taxes and takings in budgetary terms, causing the distortionary effects of compensation and property taxation to cancel each other out through the balanced budget condition.

Keywords: Compensation for takings; eminent domain; moral hazard; public goods (search for similar items in EconPapers)
JEL-codes: H41 K11 R52 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2007-02
New Economics Papers: this item is included in nep-law and nep-pbe
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Journal Article: Public goods, taxes, and takings (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2007-02

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