In this paper, we model and examine the effects of two salient features of eminent-domain law and its use. First, the compensation is less than full. Second, the government is not a perfect agent of society. Once these features are taken into account, several claims in the existing literature do not hold. Our results question the fiscal illusion theory. We show that full compensation ensures efficiency neither of the takings nor of the investment decisions. Moreover, departure from efficiency can get worse with the tightening of budget constraints. However, undercompensation, combined with the provision of restitution, delivers a better outcome in terms of investment choices by the owners and the taking decisions and choice of projects by the government. Furthermore, we show that fixed-compensation schemes generally are not efficient even if the government is benevolent, but undercompensation can still deliver an outcome more efficient than full compensation.

中文翻译：

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有兴趣的政府夺取土地：主要领域的经济分析

在本文中，我们对突出域法的两个显着特征及其使用的效果进行建模和检验。首先，赔偿不足。第二，政府不是社会的完美代理。一旦考虑了这些特征，现有文献中的若干主张将不成立。我们的结果质疑财政幻觉理论。我们证明，全额补偿既不能确保收益也不能确保投资决策的效率。此外，随着预算约束的收紧，效率的恶化可能变得更糟。但是，补偿不足与提供赔偿相结合，在所有者的投资选择以及政府的决策和项目选择方面提供了更好的结果。此外，