• Print
  • Email

Policy Discussion Paper, No. PDP 2008-2, May 2008
Private Takings

This paper considers the implications associated with recent Supreme Court rulings that can be interpreted as supporting the use of eminent domain in transferring the property rights from one agent, a landowner, to another private agent, a developer. A potential benefit of the ruling is that it effectively eliminates a hold-out problem, i.e. the problem associated with potential sellers withholding their property in an attempt to obtain a larger surplus. But, when property rights are transferred via eminent domain, landowners' investments in their properties become more inefficient and the level of redevelopment may actually fall. Compared to voluntary exchange, when property rights are transferred via eminent domain, social welfare will increase only if the hold-out problem is significant; otherwise, it will fall.

Policy discussion papers are not edited, and all opinions and errors are the responsibility of the author(s). The views expressed do not necessarily reflect the views of the Federal Reserve Bank of Chicago or the Federal Reserve System.

Having trouble accessing something on this page? Please send us an email and we will get back to you as quickly as we can.

Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago, Illinois 60604-1413, USA. Tel. (312) 322-5322

Copyright © 2024. All rights reserved.

Please review our Privacy Policy | Legal Notices