Property Takings in Developed versus Developing Countries: Economics, Politics, and the Limits of the Holdout Problem

Property takings are common in the developing world. For example, despite Chinese reforms in 2003 to protect property rights, Chinese governments forced thousands of families to relocate during the buildup to the Beijing Olympics. In recent years, governments in Peru, Venezuela, Bolivia, Zimbabwe, Russia, and others have nationalized heavy industry as well as specific firms. Large-scale land takings also have occurred in some of these same countries through reallocation of commercial farmland across economic and ethnic lines to preferred constituencies. Because they are occurring in underdeveloped economies, these takings share the feature that they occur under weaker political and legal institutions and, generally speaking, under a poor rule of law; that is, they occur in countries whose governments are at least partially unconstrained from violating individual rights to private property. Perhaps surprisingly, similar cases of takings occur in developed countries where the rule of law is generally strong. We need look no farther than the United States to draw this point. In 1978, for example, the State of Hawaii compelled the transfer of land ownership from a small number of traditional family owners to a large number of their lessees. Most home dwellers on the island owned their homes but leased the land that the houses were on from one of these traditional families. The State argued that the concentration of land ownership created undesirable, oligopolistic outcomes