Essays in the political economy of eminent domain and efficient water resource management

The use of eminent domain power for economic development is an important part of public policy in the U.S. Eminent domain is however a complicated policy with divergent impacts on different segments of society. Two unresolved issues arising from the use of eminent domain include first, how the perceived benefits and costs of eminent domain affect people's positions on the reform of eminent domain law. This is addressed in the first essay of this dissertation by setting up and estimating a voting model that explains voters' decision on the reform of eminent domain and regulatory compensation laws in the U.S. The second research issue involves the choice of owner compensation levels that minimize the problem of holdouts and close the gap between the theoretically proven effectiveness of eminent domain in resolving holdouts, and observation of protracted eminent domain negotiations in practice. This is addressed in the second essay using a two-period sequential game between property owners and local governments. Finally, the third essay looks at the implications of functional form choices for cost function estimations in the U.S water industry.;The first essay investigates voter responses to referenda in the 2006 midterm elections on restricted use of eminent domain power, and regulatory takings compensation. Results indicate that voters responded to these referenda on eminent domain quite differently depending on whether the referenda included a requirement of compensation for regulatory takings. A plurality of voters favored reforming eminent domain law to limit its use for economic development purposes. Compensation for regulatory takings was viewed less favorably. Combining these two issues on one ballot therefore increases the proportion of voters rejecting the ballot on restricted use of eminent domain. Further, county level socio-economic variables capturing the perceived benefits and costs of eminent domain power were important for referendum outcomes. Next, theoretical research findings by Miceli and Segerson (2007) indicate that the threat of eminent domain resolves owner holdout problems in property takings. Law and economics literature on eminent domain takings however abound of eminent domain cases that end up in the courts because of disagreements between owners and governments over compensation levels. The second essay reconciles the disparity between theoretical predictions and actual observations about the effectiveness of eminent domain in addressing owner holdouts. Using a two period sequential game framework it is shown that the threat of eminent domain guarantees resolution of the holdout problem only when owners have complete and perfect information about the bargaining problem. These informational assumptions are later relaxed to model more practical eminent domain bargaining problems. Finally, the third essay estimates total variable cost functions for potable water facilities in the U.S. Cost functions are parameterized using the Hyperbolically Adjusted Cobb-Douglas (HACD) and the translog functional forms. The results show wide disparity in some of the estimated efficiency parameters although the measure of fit is close for the two functional forms. The results show the importance of using more than one functional form in cost function estimations to allow for comparison and assessment of reliability of estimates.