Abel M. Winn

Land assembly with taxes, not takings

ABSTRACT We use a novel tax mechanism – ‘rejected offer reassessment’ (ROR) – in laboratory experiments to discourage seller holdout and facilitate land assembly. Under this mechanism, if a landowner rejects a developer’s offer, his taxable property value is reassessed to be equal to the rejected offer, increasing his taxes. We find that, relative to a control treatment, ROR discourages the magnitude of seller holdout (but not its frequency) and increases the rate of successful land assembly by almost 60%. It also increases the gains from trade by 22.1% relative to the control treatment, but the difference is not statistically significant.

Land Assembly Without Eminent Domain: Laboratory Experiments of Two Tax Mechanisms

We use laboratory experiments to test the ability of two self-assessment tax mechanisms to discourage seller holdout and facilitate land assembly. Each mechanism requires a seller to declare a price at which he is willing to sell his property. The incentive to overstate the value is mitigated by using the declared price to assess a property tax. The incentive to understate the value is mitigated by allowing developers to buy the property at the declared price. One tax mechanism uses tax formula that is complex to calculate but incentive compatible to elicit sellers’ true reservation values. The second uses a flat tax rate that is easy to implement but not incentive compatible. We find that sellers overstate their reservation values under both tax mechanisms. Nevertheless, both mechanisms increase the rate of successful land assembly by 67% and the gains from trade by more than 120% relative to a control treatment. Given their equal performance, the flat tax rate seems the best option given the easy of its implementation.

Like Flies in a Jar? A Natural Experiment of Self-Control in an Organizational Social Dilemma with Large Stakes

We study the practice of self-control in an organizational social dilemma when the stakes are large, using 47 years of vital census data from 18th century Sweden. From 1750 to 1800, ninety percent of Sweden (the peasantry) lived in a simple-structure organization called a bytvång or village commons. The amount of resources a village family received was a function of their size. During this period, crop failures left the population facing starvation. Using autoregressive time-series modeling, we test whether the people of Sweden continued to take steps toward increasing the stress on the commons by marrying and birthing children or practiced self-control. We find evidence that the peasantry – with little education, archaic agricultural practices, strong barriers to abortion and infanticide, and pressures by the Church and State to procreate – were less likely to marry and birth children (in or outside of wedlock) when the quality of the previous year’s harvest was poor compared to when it was bounteous. Our findings suggest that human population growth is not a social dilemma called a collective trap – which has been the assumption for 50 years. Rather, human population growth is an individual dilemma – suggesting that members of simple-structured organizations can unilaterally exercise self-control and manage resources through self-organizing.

Retrading, production, and asset market performance

Significance We conduct the first experimental study to our knowledge of production and trade in a stock-flow market for durable assets. When inexperienced consumers are allowed to resell assets they compete with producers and depress prices, disrupting production and causing inefficiency. Consumers with experience specializing as buyers compete less vigorously, which allows prices and production to converge to equilibrium. Prior studies have shown that traders quickly converge to the price–quantity equilibrium in markets for goods that are immediately consumed, but they produce speculative price bubbles in resalable asset markets. We present a stock-flow model of durable assets in which the existing stock of assets is subject to depreciation and producers may produce additional units of the asset. In our laboratory experiments inexperienced consumers who can resell their units disregard the consumption value of the assets and compete vigorously with producers, depressing prices and production. Consumers who have first participated in experiments without resale learn to heed their consumption values and, when they are given the option to resell, trade at equilibrium prices. Reproducibility is therefore the most natural and most effective treatment for suppression of bubbles in asset market experiments.