Institutional imperfections and buyer-induced holdout in land acquisition

Article Type

Research Article

Publication Title

Journal of Institutional and Theoretical Economics

Abstract

We look beyond the well-studied issues of fair compensation, regulatory tak-ings, 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 di-rection 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.

First Page

261

Last Page

298

DOI

10.1628/jite-2021-0012

Publication Date

1-1-2021

Comments

Open Access, Green

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