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Irreversible
Development and Eminent Domain: An Option Value Approach to Greenspace
Compensation
URAG Working Paper #03-01
Irreversible Development and Eminent Domain: An Option Value Approach to Greenspace Compensation (pdf)
by Geoffrey K. Turnbull, August 2003
Keywords: Eminent domain, compensation, greenspace, land value
This paper applies option value theory to the eminent domain problem
for greenspace, where private investment permanently destroys potential
social value of land. Full compensation by the government for taking vacant
land by eminent domain can slow the pace of private development but does
not lead to an efficient outcome when prices adjust endogenously to the
taking threat. The efficiency of eminent domain compensation is sensitive
to how full compensation is calculated and to the nature of the alternative
potential social land use. Greenspace value leads to fundamentally different
conclusions than do social values derived from roads or other public infrastructure
for which irreversibility is not an issue.
Comments and questions regarding this paper may be directed to Geoffrey Turnbull at gturnbull@gsu.edu.