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

  • Marko Koethenbuerger

    ()

  • Panu Poutvaara

    ()

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 toward wage taxation.

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File URL: http://hdl.handle.net/10.1007/s10797-008-9085-9
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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
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915

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  1. 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.
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  11. Eaton, Jonathan, 1988. "Foreign-Owned Land," American Economic Review, American Economic Association, vol. 78(1), pages 76-88, March.
  12. Marko Köthenbürger & Panu Poutvaara, 2004. "Social Security Reform and Intergenerational Trade: Is there Scope for a Pareto-Improvement?," Public Economics 0404008, EconWPA.
  13. Ihori, Toshihiro, 1990. "Economic effects of land taxes in an inflationary economy," Journal of Public Economics, Elsevier, vol. 42(2), pages 195-211, July.
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