Institutional Imperfections and Buyer-Induced Holdout in Land Acquisition

Sreeparna Saha, Prabal Roy Chowdhury, Jaideep Roy and Grazyna Wiejak-Roy

Journal of Institutional and Theoretical Economics (JITE), 2021, vol. 177, issue 3, 261-298

Abstract: We look beyond the well-studied issues of fair compensation, regulatory takings, and seller-induced holdout that arise in the government purchase of land for economic development. We argue that political rivalry distorts land acquisition negotiations between private sellers and a private buyer driven by profits. We determine these distortions endogenously and characterise conditions when the buyer's optimal design to acquire land generates holdout. We analyse how bureaucratic corruption that increases transaction costs affects the degree and direction of political distortions and the incidence of holdout. We find that the size of corruption has nuanced nonmonotonic influences on holdout, seller welfare, and buyer's profits.

Keywords: land acquisition for private profits; political rivalry; institutional imperfections; buyer-induced holdout (search for similar items in EconPapers)
JEL-codes: D K11 O25 O4 Q15 R52 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Institutional Imperfections and Buyer-Induced Holdout in Land Acquisition (2020)
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DOI: 10.1628/jite-2021-0012

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