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date: 23 May 2022

Abstract and Keywords

This chapter summarizes eminent domain jurisprudence and the main economic approaches to analyzing eminent domain. Eminent domain potentially corrects two inefficiencies in land markets: (1) inefficiency from holdouts and (2) the undersupply of public goods from urban redevelopment. The original model developed in this chapter shows that eminent domain also affects the performance of the land assembly market, and thus market failure must be assessed in light of a third potential land market inefficiency induced by the option for eminent domain. The results also suggest that information asymmetry is a cause of land assembly market failure. The model identifies conditions under which eminent domain is likely to be more efficient than private assembly and vice versa. This model helps assess recent controversies arising following the Kelo case in eminent domain jurisprudence, and it offers a new opportunity for further economic investigation of urban land market failures.

Keywords: eminent domain, land assembly, holdouts, redevelopment, public goods, market failure, urban land, Kelo

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