Growth Under the Shadow of Expropriation: the Economic Impacts of Eminent Domain

This paper uses the U.S. Federal Courts to study the impact of government power of eminent domain on growth and inequality. Since the 1950s, Republican judges with prior experience advocating on behalf of the government were more likely to increase government powers of eminent domain while minority Democrat judges did the opposite. In the Circuit Courts, judges are randomly assigned and are responsible for the legal precedents that affect the lower courts within its geographic boundaries. Using a dataset we collected on all the court decisions, we compare the subsequent local government and economic response after the assignment of these different judges. We show that the assignment of the judge affects eminent domain precedent and subsequent government activity, economic growth, and inequality. Specifically, the societal effects are directly relevant to the preferences of the judges.

Daniel L. Chen and Susan Yeh

Society for Institutional and Organizational Economics

October 2012

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