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Sustainable Forestry: Timber Bequests, Future Generations and Optimal Tax Policy

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  • Markku Ollikainen

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    Abstract

    This paper analyzes harvesting and timber bequest behavior in a two-period overlapping generations model where the government uses site productivity, yield and inheritance taxation. The ceteris paribus effects of forest and inheritance taxes are derived first, then the paper discusses the optimal design of forest and inheritance taxes by assuming that intergenerational externalities are either absent or operative. In the absence of intergenerational externalities, it is optimal to use only the site productivity tax, and not to introduce yield and inheritance taxes at all. In the presence of intergenerational externalities the situation changes. The paper demonstrates that the externality can be internalized by introducing either a yield tax or an inheritance subsidy, or both. If the government is able to use both at the same time, it is desirable to use the yield tax to 'punish' excessive harvesting and an inheritance subsidy to 'bribe' to give bequests. Copyright Kluwer Academic Publishers 1998

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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 12 (1998)
    Issue (Month): 3 (October)
    Pages: 255-273

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    Handle: RePEc:kap:enreec:v:12:y:1998:i:3:p:255-273

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    Web page: http://www.springerlink.com/link.asp?id=100263

    Related research

    Keywords: forest taxation; sustainable development; timber bequest;

    References

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    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Blinder, Alan S, 1973. "A Model of Inherited Wealth," The Quarterly Journal of Economics, MIT Press, vol. 87(4), pages 608-26, November.
    3. ERKKI Koskela & MARKKU Ollikainen, 1997. "Optimal Design of Forest Taxation with Multiple-Use Characteristics of Forest Stands," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 10(1), pages 41-62, July.
    4. Mourmouras, Alex, 1991. " Competitive Equilibria and Sustainable Growth in a Life-Cycle Model with Natural Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(4), pages 585-91.
    5. Mourmouras, Alex, 1993. "Conservationist government policies and intergenerational equity in an overlapping generations model with renewable resources," Journal of Public Economics, Elsevier, vol. 51(2), pages 249-268, June.
    6. Richard B. Howarth & Richard B. Norgaard, 1990. "Intergenerational Resource Rights, Efficiency, and Social Optimality," Land Economics, University of Wisconsin Press, vol. 66(1), pages 1-11.
    7. 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.
    8. Carmichael, Jeffrey, 1982. "On Barro's Theorem of Debt Neutrality: The Irrelevance of Net Wealth," American Economic Review, American Economic Association, vol. 72(1), pages 202-13, March.
    9. 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.
    10. 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.
    11. Kotlikoff, Laurence J, 1988. "Intergenerational Transfers and Savings," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 41-58, Spring.
    12. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
    13. Dennis, Donald F., 1990. "A probit analysis of the harvest decision using pooled time-series and cross-sectional data," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 176-187, March.
    14. Kemp, Murray C & Long, Ngo Van, 1979. "The Under- Exploitation of Natural Resources: A Model with Overlapping Generations," The Economic Record, The Economic Society of Australia, vol. 55(150), pages 214-21, September.
    15. Daniel J. Kovenock & Michael Rothschild, 1983. "Capital Gains Taxation in an Economy with an "Austrian Sector"," NBER Working Papers 0758, National Bureau of Economic Research, Inc.
    16. Sandmo, Agnar, 1985. "The effects of taxation on savings and risk taking," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 5, pages 265-311 Elsevier.
    17. Amacher, Gregory S. & Brazee, Richard J., 1997. "Designing Forest Taxes with Varying Government Preferences and Budget Targets," Journal of Environmental Economics and Management, Elsevier, vol. 32(3), pages 323-340, March.
    18. Andrew B. Abel, 1986. "Bequests and Social Security With Uncertain Lifetimes," NBER Working Papers 1372, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Conway, M.Christine & Amacher, Gregory S. & Sullivan, Jay & Wear, David, 2003. "Decisions nonindustrial forest landowners make: an empirical examination," Journal of Forest Economics, Elsevier, vol. 9(3), pages 181-203.
    2. Bréchet, Thierry & Lambrecht, Stéphane, 2011. "Renewable resource and capital with a joy-of-giving resource bequest motive," Resource and Energy Economics, Elsevier, vol. 33(4), pages 981-994.
    3. Barua, Sepul K. & Kuuluvainen, Jari & Uusivuori, Jussi, 2011. "Taxation, life-time uncertainty and non-industrial private forest-owner's decision-making," Journal of Forest Economics, Elsevier, vol. 17(3), pages 267-284, August.

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