Self-Assessment of
Takings Compensation:
An Empirical Study
Yun-chien Chang, J.S.D. (NYU)
Assistant Research Professor,
Academia Sinica, Taiwan
Motivation

Ad hoc governmental assessment of takings
compensation is inaccurate.


Alternative: use self-assessed property value?


Chang 2010a, 2010b.
Levmore 1982; Bell and Parchomovsky 2007; etc.
Is the alternative better?
Yun-chien Chang_IIAS
2
Research Questions

The Claim:


Landowners’ periodically reported (ex ante) selfassessment of property value will accurately
reflect economic value.
My goal:

Empirical evidence to support or refute the claim.
Yun-chien Chang_IIAS
3
Major Findings & Explanation
Data from Taiwan 1954-1977 shows that
Self-assessed values are much lower than EV.
 Tax rate is much higher than condemnation
probability.

Yun-chien Chang_IIAS
4
Where we are…






1. Self-assessment theory
2. Taiwan’s regime
3. Empirical strategy
4. Data
5. Findings
6. Explanations
Yun-chien Chang_IIAS
5
Where we are…






1. Self-assessment theory
2. Taiwan’s regime
3. Empirical strategy
4. Data
5. Findings
6. Explanations
Yun-chien Chang_IIAS
6
Condemnation
compensation
Annual property tax
Self-assess
property value
landowner
Theory: Basic Ideas & Claims

Ideal model—prerequisite:
tax rate = condemnation prob.



Chang 2010c
Real world: tax rate ≠ condemnation prob.
If tax rate > condemnation prob.
Owners under-assess.
Yun-chien Chang_IIAS
8
Where we are…






1. Self-assessment theory
2. Taiwan’s regime
3. Empirical strategy
4. Data
5. Findings
6. Explanations
Yun-chien Chang_IIAS
9
Landowners pay tax & receive
compensation according to DLV
Yes
DLV ≧80%PALV
No
Owners re-assess or
condemnation
Landowners report self-assessments, DLV
Each land was assigned an official land value, PALV
Government investigates transaction prices
Where we are…






1. Self-assessment theory
2. Taiwan’s regime
3. Empirical strategy
4. Data
5. Findings
6. Explanations
Yun-chien Chang_IIAS
11
Empirical Strategy

DLV ≤ PALV < FMV ≤ EV
Yun-chien Chang_IIAS
12
Empirical Strategy

DLV ≤ PALV < FMV ≤ EV

Dictate by theory.
Yun-chien Chang_IIAS
13
Empirical Strategy

DLV ≤ PALV < FMV ≤ EV


Known from the literature.
PALV ≒ 56% of FMV.
Yun-chien Chang_IIAS
14
Empirical Strategy

DLV ≤ PALV < FMV ≤ EV

What this project needs to know.
Yun-chien Chang_IIAS
15
Where we are…






1. Self-assessment theory
2. Taiwan’s regime
3. Empirical strategy
4. Data
5. Findings
6. Explanations
Yun-chien Chang_IIAS
16
Data


Comprehensive, large data sets.
From government publications and internal
government documents—highly credible.
Yun-chien Chang_IIAS
17
Landowners' self-assessment patterns in Taiwan Province, 1956 - 1974
81.2
80
79.9
69
68.1
66.6
40
60
65.2
33.5
33.2
31.4
27
20
19.7
3
1
1.3
.3
.1
.5
.1
.4
.1
.2
0
0
.1
17.9
1956
1964
1968
1969
1970
1974
DLV divided by PALV
<80%
=80%
=100%
>100%
Landowners' DLV reporting rate from 97.6% to 99.8%.
Data after 1967 excluded Taipei City, whose data are listed in Figure 2.
Yun-chien Chang_IIAS
18
100
Landowners' self-assessment patterns in Taipei City, 1968 - 1975
81.7
40
60
80
76.3
0
20
21.6
18.2
2
.1
.1
0
1968
1975
DLV divided by PALV
<80%
=80%
=100%
>100%
Landowners' DLV reporting rate from 97.0% to 98.6%.
Yun-chien Chang_IIAS
19
Landowners' self-assessment patterns in Taiwan Province (by jurisdiction), 1956
Taipei City
Taipei County
Yilan County
Taoyuan County
Miaoli County
Taichung County
Changhua County
Nantou County
Yunlin County
Chiayi County
Tainan County
Kaohsiung County
Pingtung County
Taitung County
Hualien County
Penghu County
Tainan City
0
20
40
Percentage of cases
60
80
(%)
DLV divided by PALV
<80%
=80%
80%~100%
=100%
>100%
Data in 6 of the 23 jurisdictions are missing.
Yun-chien Chang_IIAS
20
Where we are…






1. Self-assessment theory
2. Taiwan’s regime
3. Empirical strategy
4. Data
5. Findings
6. Explanations
Yun-chien Chang_IIAS
21
Findings


<1% landowners: DLV>PALV.
66%~75% landowners: DLV = 80% of PALV.
Yun-chien Chang_IIAS
22
Findings

DLV ≤ PALV < FMV ≤ EV
Yun-chien Chang_IIAS
23
Findings

DLV ≤ PALV < FMV ≤ EV
Yun-chien Chang_IIAS
24
Findings


DLV ≤ PALV < FMV ≤ EV
Self-assessment theorists’ claims are not
borne out by the evidence from Taiwan.
Yun-chien Chang_IIAS
25
Where we are…






1. Self-assessment theory
2. Taiwan’s regime
3. Empirical strategy
4. Data
5. Findings
6. Explanations
Yun-chien Chang_IIAS
26
Explanations

Tax rate > condemnation prob.
(7%)
Yun-chien Chang_IIAS
27
.003
0
.001
.002
0.00288
0.00007
1957
1960
1963
1966
1969
1972
1975
1978
Year
Yun-chien Chang_IIAS
28
Explanations


Not all condemnees received compensation.
Poor landowners will under-assess even
when doing so does not maximize their longterm welfare.

because they cannot afford to pay taxes based on
accurate assessments—not to mention strategic
over-assessments.
Yun-chien Chang_IIAS
29
Generality



Applicable in the US context.
Strategically-determined
self-assessments
are not necessarily lower than economic
value, though.
Were an American state to adopt the
scholars’ models, accurate self-assessments
were unlikely to follow.
Yun-chien Chang_IIAS
30
Lessons


Landowners’ assessment decisions are
(sensitively!) shaped by various incentives
and disincentives provided by the legal
regime.
Self-assessment of property value is also
imperfect!
Yun-chien Chang_IIAS
31
The END
Yun-chien Chang_IIAS
32