Government Expropriation Increases Economic Growth and Racial Inequality: Evidence from Eminent Domain

Abstract

Is it justified for states to appropriate private property rights? If so, should governments expropriate or regulate? We test three conventional views: insecure property rights cause underinvestment, moral hazard cause overinvestment, or public use cause economic growth. We embed these mechanisms in a model and measure them using the random assignment of U.S. federal court judges setting geographicallylocal precedent. For a half-century, racial minority Democrats were more likely to strike down government appropriations while Republican former federal prosecutors were more likely to uphold them. We find that pro-government physical takings precedent stimulated subsequent takings, expropriation of larger parcels, highway construction, and growth in construction, transportation, and government sectors as well as agriculture, retail, and financial sectors, overall economic growth, and property values. However, racial minorities were increasingly displaced, unemployed, and living in public housing, and the service sector declined. Pro-government regulatory takings precedent also spurred economic growth and property values, but did not increase displacement or racial inequality.

Political Divide, Weak Property Rights, and Infrastructure Provision: An Empirical Examination of Takings Decisions in Jerusalem

“…The redistributive effect I observe is therefore not only with regard to transfers from Palestinians to Jews, it is also potentially with regard to transfers from the poor to the rich. As already hinted and as previously observed in the literature, these two stories are not independent (Somin 2015; Becher 2014; Chen and Yeh 2012; Carpenter and Ross 2009) and this is yet another case for the effects of intersectionality and the need to provide public policy solutions to them (Hankivsky and Cormier 2011; Crenshaw 1988).…”

“…In an important contribution, Chen and Yeh (2012) examined the effects of pro-taking court precedents. They reported that court decisions that expanded the government’s power of expropriation spurred economic growth and property prices by 0.2 percent, but reduced racial minorities’ home ownership and employment by 0.5 percent and 0.3 percent, respectively.…”

Judicial analytics and the great transformation of American Law

“…Table 8 lists a few. The data is then merged with judge biographies, both from the Federal Judiciary Center as well as separate data collection from newspaper articles (Chen and Yeh 2014a).…”