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Foreign-Owned Land

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  • Jonathan Eaton

Abstract

Land and capital serve not only as factors of production but as assets which households use as stores of value. Standard trade models typically recognize only the first role. In its role as an asset land reduces the amount of national savings available for capital investment. Foreign investment affects the national economy through both asset markets and factor markets. When the share of labor in the land-using sectoris large relative to the labor share in the capital-using sector, factor-market effects are likely to dominate. In this case a drop in the price of the agricultural good or a rise in the land-labor ratio attracts foreign investment, while a drop in the world interest rate raises the welfare of a capital-importing country. If the share of labor in the land-using sector is smaller, however, asset-market effects dominate. These results are then likely to be reversed. Even when trade in claims on land equalizes the domestic and world interest rates, a tax on land raises steady-state welfare.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1512.

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Date of creation: Dec 1984
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Publication status: published as From The American Economic Review, Vol. 78, No. 1, pp. 76-88, (March 1988).
Handle: RePEc:nbr:nberwo:1512

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  1. Bhagwati, Jagdish N. & Brecher, Richard A., 1980. "National welfare in an open economy in the presence of foreign-owned factors of production," Journal of International Economics, Elsevier, Elsevier, vol. 10(1), pages 103-115, February.
  2. Guillermo A. Galvo & Laurence J. Kotlikoff & Carlos Alfredo Rodriguez, 1978. "The Incidence of a Tax on Pure Rent: A New Reason for an Old Answer," UCLA Economics Working Papers, UCLA Department of Economics 125, UCLA Department of Economics.
  3. Eaton, Jonathan, 1987. "A Dynamic Specific-Factors Model of International Trade," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(2), pages 325-38, April.
  4. 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, University of Chicago Press, vol. 85(2), pages 349-60, April.
  5. Buiter, Willem H, 1981. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 769-97, August.
  6. Srinivasan, T. N., 1983. "International factor movements, commodity trade and commercial policy in a specific factor model," Journal of International Economics, Elsevier, Elsevier, vol. 14(3-4), pages 289-312, May.
  7. Kareken, John & Wallace, Neil, 1977. "Portfolio autarky: A welfare analysis," Journal of International Economics, Elsevier, Elsevier, vol. 7(1), pages 19-43, February.
  8. Brecher, Richard A. & Findlay, Ronald, 1983. "Tariffs, foreign capital and national welfare with sector-specific factors," Journal of International Economics, Elsevier, Elsevier, vol. 14(3-4), pages 277-288, May.
  9. Christophe Chamley & Wright, Brian D. Wright, 1983. "Fiscal Incidence in a Dynamic Life-Cycle Model with Land," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 666, Cowles Foundation for Research in Economics, Yale University.
  10. Bhagwati, Jagdish N. & Tironi, Ernesto, 1980. "Tariff change, foreign capital and immiserization : A theoretical analysis," Journal of Development Economics, Elsevier, Elsevier, vol. 7(1), pages 71-83, February.
  11. Dutton, John, 1982. "The Optimal Taxation of International Investment Income: A Comment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(2), pages 373-80, May.
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Cited by:
  1. Petrucci, Alberto, 2005. "The Incidence of a Tax on Pure Rent in a Small Open Economy," Economics & Statistics Discussion Papers esdp05025, University of Molise, Dept. EGSeI.
  2. Koethenbuerger, Marko & Poutvaara, Panu, 2009. "Rent taxation and its intertemporal welfare effects in a small open economy," Munich Reprints in Economics, University of Munich, Department of Economics 19461, University of Munich, Department of Economics.
  3. Bertrand CRETTEZ & Claire LOUPIAS & Philippe MICHEL, 1997. "Croissance et modes de propriété des terres," Annales d'Economie et de Statistique, ENSAE, issue 48, pages 119-146.
  4. Jonathan Skinner, 1989. "Housing Wealth and Aggregate Saving," NBER Working Papers 2842, National Bureau of Economic Research, Inc.
  5. Coulson, N. Edward & Li, Herman, 2010. "The effect of risk on the effect of a land tax: A simulation," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 40(6), pages 530-537, November.
  6. James A. Brander, 1989. "Taxation of Foreign-Owned Land," NBER Working Papers 3070, National Bureau of Economic Research, Inc.
  7. Petrucci, Alberto, 2006. "Wealth Accumulation and Growth in a Specific-Factors Model of Trade and Finance," Economics & Statistics Discussion Papers esdp06029, University of Molise, Dept. EGSeI.
  8. Mountford, Andrew, 2004. "Global Analysis Of An Overlapping Generations Economy With Land," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 8(05), pages 582-595, November.
  9. Nobuhiro Kiyotaki & Kenneth D. West, 2004. "Land Prices and Business Fixed Investments in Japan," NBER Working Papers 10909, National Bureau of Economic Research, Inc.

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