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Rent taxation and its intertemporal welfare effects in a small open economy

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  • Marko Koethenbuerger

    ()

  • Panu Poutvaara

    ()

Abstract

Previous literature concludes that replacing wage taxation by taxes on a fixed factor or its rents benefits future generations. However, the effects of such steady-state gains on the transition generations have been left open. In this paper, we show that taxation of rents may also increase utility of the current generation provided tax revenues are earmarked to reduce wage taxes. In particular, a shift in the tax mix may yield an intergenerational Pareto-improvement when the initially prevailing tax mix is sufficiently skewed towards wage taxation.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s10797-008-9085-9
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 16 (2009)
Issue (Month): 5 (October)
Pages: 697-709

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Handle: RePEc:kap:itaxpf:v:16:y:2009:i:5:p:697-709

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: Rent taxes; Capitalization; Transitional dynamics; Labor supply; Asset prices; H22; E62; F02;

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  1. Bovenberg, A.L. & Gordon, R.H., 1996. "Why is capital so immobile internationally? Possible explanation and implications for capital income taxation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-73564, Tilburg University.
  2. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-60, April.
  3. Marko Koethenbuerger & Panu Poutvaara, 2002. "Social Security Reform and Intergenerational Trade: Is there Scope for a Pareto-Improvement?," CESifo Working Paper Series 795, CESifo Group Munich.
  4. Immervoll, Herwig & Kleven, Henrik & Kreiner, Claus Thustrup & Saez, Emmanuel, 2004. "Welfare Reform in European Countries: A Micro-Simulation Analysis," CEPR Discussion Papers 4324, C.E.P.R. Discussion Papers.
  5. Antonio Rangel, 2005. "How to Protect Future Generations Using Tax-Base Restrictions," American Economic Review, American Economic Association, vol. 95(1), pages 314-346, March.
  6. Ihori, Toshihiro, 1990. "Economic effects of land taxes in an inflationary economy," Journal of Public Economics, Elsevier, vol. 42(2), pages 195-211, July.
  7. Eaton, Jonathan, 1988. "Foreign-Owned Land," American Economic Review, American Economic Association, vol. 78(1), pages 76-88, March.
  8. Petrucci, Alberto, 2006. "The incidence of a tax on pure rent in a small open economy," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 921-933, May.
  9. Antonio Rangel, 2002. "How to Protect Future Generations Using Tax Base Restrictions," NBER Working Papers 9179, National Bureau of Economic Research, Inc.
  10. Calvo, Guillermo A & Kotlikoff, Laurence J & Rodriguez, Carlos Alfredo, 1979. "The Incidence of a Tax on Pure Rent: A New (?) Reason for an Old Answer," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 869-74, August.
  11. Antonio Rangel, 2003. "Forward and Backward Intergenerational Goods: Why Is Social Security Good for the Environment?," American Economic Review, American Economic Association, vol. 93(3), pages 813-834, June.
  12. Marko Kothenbürger & Panu Poutvaara, 2006. "Social Security Reform and Investment in Education: Is There Scope for a Pareto Improvement?," Economica, London School of Economics and Political Science, vol. 73(290), pages 299-319, 05.
  13. Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
  14. Panu Poutvaara, 2001. "Gerontocracy Revisited. Unilateral Transfer to the Young May Benefit the Middle-Aged," CESifo Working Paper Series 500, CESifo Group Munich.
  15. Chamley, Christophe & Wright, Brian D., 1987. "Fiscal incidence in an overlapping generations model with a fixed asset," Journal of Public Economics, Elsevier, vol. 32(1), pages 3-24, February.
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