Land acquisition: Political intervention, fragmentation and voice

Abstract

This paper develops a simple dynamic framework of holdout in land acquisition (both with and without political intervention), where holdout arises because of the landowners’ inability to manage large sums of money (and consequent lack of inter-temporal consumption smoothing in case of sale) – formalized as landowners having sophisticated present-biased preferences. We then use this framework to analyze two issues of interest, political intervention and fragmentation. We find that politicization cannot improve efficiency if holdout is landowner-induced, and may even increase inefficiency if holdout is buyer-induced. Further, the extent of politicization depends on whether it involves voice for non-members or not. Turning to the effects of fragmentation, we find that while it increases holdout in the absence of politicization, in the presence of politicization this effect may, however, be reversed.