The Supreme Court decision in Kelo v. New London (2005) authorized the use of eminent domain for economic redevelopment provided that there are sufficient spillover benefits to the public. This article examines the economic basis for this decision and tests the conclusions using cross-state data on "development takings" over the period 1998 to 2002. It also examines the political responses by states to limit such takings in the aftermath of Kelo. The results are consistent with the economic justification for eminent domain as a means of overcoming the holdout problem.