Laboratory Experiments of Land Assembly Without Eminent Domain

Mark DeSantis, Matthew McCarter and Abel Winn

A chapter in Experimental Law and Economics, 2022, vol. 21, pp 35-125 from Emerald Group Publishing Limited

Abstract: The authors use laboratory experiments to test two self-assessment tax mechanisms for facilitating land assembly. One mechanism is incentive compatible with a complex tax function, while the other uses a flat tax rate to mitigate implementation concerns. Sellers publicly declare a price for their land. Overstating its true value is penalized by using the declared price to assess a property tax; understating its value is penalized by allowing developers to buy the property at the declared price. The authors find that both mechanisms increase the rate of land assembly and gains from trade relative to a control in which sellers’ price declarations have no effect on their taxes. However, these effects are statistically insignificant or transitory. The assembly rates in our self-assessment treatments are markedly higher than those of prior experimental studies in which the buyer faces bargaining frictions, such as costly delay or capital constraints.

Keywords: Land assembly; holdout problem; incentive compatibility; tax policy; Harberger taxation; real-estate development (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rexezz:s0193-230620220000021004

DOI: 10.1108/S0193-230620220000021004

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