Compensation Rules and Investment under Land-Taking

The purpose of this paper is to analyze the relationship between urban systems and compensation rules when government takes private land for public use. Numerous papers in Law and Economics have analyzed the problem of title transfer in land transactions. They do not, however, deal with land-taking or title transfer in the framework of spatial economics for simplification of the model. When government plans for provision of public goods, it often needs land in the region to do it. In the United States, for example, if public goods increase the utility level of each household in the city, the land required to provide them can be expropriated with fair compensation. In this paper, we focus on this compensation rule for land-taking and attempt to analyze the effects of it on a spatial model and the landowners. investment behavior on their own land.