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Rent Taxation and its Intertemporal Welfare Effects in a Small Open Economy

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Author Info
Koethenbuerger, Marko / Poutvaara, Panu

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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.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2158.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2158

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Related research
Keywords: rent taxes; capitalization; transitional dynamics; labor supply; asset prices;

References listed on IDEAS
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  1. 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. [Downloadable!] (restricted)
    Other versions:
  2. Marko Köthenbürger & Panu Poutvaara, 2004. "Social Security Reform and Intergenerational Trade: Is there Scope for a Pareto-Improvement?," Public Economics 0404008, EconWPA. [Downloadable!]
    Other versions:
  3. 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. [Downloadable!] (restricted)
  4. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1039-1073, August. [Downloadable!] (restricted)
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  5. Antonio Rangel, 2002. "How to Protect Future Generations Using Tax Base Restrictions," NBER Working Papers 9179, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. 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. [Downloadable!]
  7. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2005. "Welfare Reform in European Countries: A Microsimulation Analysis," IZA Discussion Papers 1810, Institute for the Study of Labor (IZA). [Downloadable!]
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  8. 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. [Downloadable!]
  9. 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. [Downloadable!] (restricted)
  10. Poutvaara, Panu, 2004. "Gerontocracy revisited: unilateral transfer to the young may benefit the middle-aged," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 161-174, January. [Downloadable!] (restricted)
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  11. 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. [Downloadable!] (restricted)
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  12. Ihori, Toshihiro, 1990. "Economic effects of land taxes in an inflationary economy," Journal of Public Economics, Elsevier, vol. 42(2), pages 195-211, July. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
  14. Roger H. Gordon & A. Lans Bovenberg, 1994. "Why is Capital so Immobile Internationally?: Possible Explanations and Implications for Capital Income Taxation," NBER Working Papers 4796, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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