Land assembly with taxes, not takings

Mark DeSantis, Matthew W. McCarter and Abel Winn

Applied Economics Letters, 2019, vol. 26, issue 7, 604-607

Abstract: We use a novel tax mechanism – ‘rejected offer reassessment’ (ROR) – in laboratory experiments to discourage seller holdout and facilitate land assembly. Under this mechanism, if a landowner rejects a developer’s offer, his taxable property value is reassessed to be equal to the rejected offer, increasing his taxes. We find that, relative to a control treatment, ROR discourages the magnitude of seller holdout (but not its frequency) and increases the rate of successful land assembly by almost 60%. It also increases the gains from trade by 22.1% relative to the control treatment, but the difference is not statistically significant.

Date: 2019
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DOI: 10.1080/13504851.2018.1488047

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