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Taxation, life-time uncertainty and non-industrial private forest-owner's decision-making

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  • Barua, Sepul K.
  • Kuuluvainen, Jari
  • Uusivuori, Jussi
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    Abstract

    The nonindustrial private forest (NIPF) owner's consumption and harvesting decisions are investigated under inheritance and capital income taxes using a two-period model. The impact of the forest-owner's age is introduced into the analysis through a parameter of perceived probability of surviving through a future period. This allows us to study the impacts of ageing on consumption and harvesting decisions as well as to see how the impact of taxes changes among different age groups of forest-owners. The results show that current consumption first decreases and then increases when moving from younger to older individuals regardless of whether non-timber assets are more or less heavily taxed through bequests than consumption. In general, we find that tax effects are dependent on the forest-owner's age. Age tends to intensify the increasing effect of the forest bequest tax on harvesting. The same is true with respect to the decreasing effect on harvesting of the inheritance tax imposed on non-forest assets. Furthermore, the forest-owner's age tends to intensify the effect on harvesting of the capital income tax imposed on forest assets, but diminishes the effect on harvesting of the capital income tax imposed on non-forest assets.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Forest Economics.

    Volume (Year): 17 (2011)
    Issue (Month): 3 (August)
    Pages: 267-284

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    Handle: RePEc:eee:foreco:v:17:y:2011:i:3:p:267-284

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    Related research

    Keywords: Inheritance taxes Capital income taxes Consumption Harvesting Human ageing Perceived probability of surviving;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Dan Kovenock, 1986. "Property and Income Taxation in an Economy with an Austrian Sector," Land Economics, University of Wisconsin Press, vol. 62(2), pages 201-209.
    2. Heer, Burkhard, 2001. " Wealth Distribution and Optimal Inheritance Taxation in Life-Cycle Economies with Intergenerational Transfers," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(3), pages 445-65, September.
    3. Karl-Gustaf Löfgren, 1991. "Another reconciliation between economists and forestry experts: OLG-arguments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(1), pages 83-95, March.
    4. Koskela, Erkki & Ollikainen, Markku, 2001. "Forest Taxation and Rotation Age under Private Amenity Valuation: New Results," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 374-384, November.
    5. Koskela, Erkki & Ollikainen, Markku, 1997. "Optimal Design of Forest and Capital Taxation in an Economy with Austrian Sector," Discussion Papers 597, The Research Institute of the Finnish Economy.
    6. Tahvonen, Olli, 1998. " Bequests, Credit Rationing and in situ Values in the Faustmann-Pressler-Ohlin Forestry Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(4), pages 781-800, December.
    7. Gregroy Amacher & Richard Brazee & Erkki Koskela & Markku Ollikainen, 1999. "Taxation, Bequests, and Short and Long Run Timber Supplies: An Overlapping Generations Problem," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(3), pages 269-288, April.
    8. Markku Ollikainen, 1998. "Sustainable Forestry: Timber Bequests, Future Generations and Optimal Tax Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(3), pages 255-273, October.
    9. Kuuluvainen, Jari, 1990. "Virtual price approach to short-term timber supply under credit rationing," Journal of Environmental Economics and Management, Elsevier, vol. 19(2), pages 109-126, September.
    10. Abel, Andrew B, 1985. "Precautionary Saving and Accidental Bequests," American Economic Review, American Economic Association, vol. 75(4), pages 777-91, September.
    11. Favada, Ibrahim M. & Kuuluvainen, Jari & Uusivuori, Jussi, 2007. "Optimal timber stock in Finnish nonindustrial private forests," Forest Policy and Economics, Elsevier, vol. 9(5), pages 527-535, January.
    12. Sun Joseph Chang, 1982. "An Economic Analysis of Forest Taxation's Impact on Optimal Rotation Age," Land Economics, University of Wisconsin Press, vol. 58(3), pages 310-323.
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