– The purpose of this paper is to review the economic theories that lie behind the assessment of compulsory purchase compensation and the issues that arise from them.
– The method has been to review the literature about the theories and the critiques of them and to examine the extent to which they provide guidance in specific cases.
– The Hicks-Kaldor compensation test was developed as a way around certain problems in welfare economics but attempts to use it to determine whether projects involving compulsory purchase increase welfare are subject to a number of problems. Ultimately, there are issues of equity as well as efficiency so that a test that just looks at efficiency issues is problematic.
– Understanding the weaknesses in the theoretical models behind compulsory purchase compensation can help policy makers devise alternative approaches in situations in which land has to be assembled for regeneration or infrastructure projects and fairer systems of compensation.
– The use of the Hicks-Kaldor test has been challenged in environmental economics but the validity of these criticisms for compulsory purchase has not been recognised to the same extent. The use of some original case studies helps to identify some of the issues and alternatives.
