IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Labor and Capital Taxation with Public Inputs as Common Property

Listed author(s):
  • James P. Feehan

    (Memorial University of Newfoundland, Canada)

  • Raymond G. Batina

    (Washington State University)

The services of many public inputs (e.g., dams, irrigation systems, and highways) are provided to private firms on a free-access basis. If these services enter constant-returns-to-scale production functions then there are decreasing returns to scale in the private factors. Thus a change in the amount of a public input gives rise to positive rent or economic profit in the first instance. The authors extend the literature by recognizing that this rent cannot be an equilibrium phenomenon. Private agents will engage in rent-seeking that will ultimately lead to dissipation. This makes a public input equivalent to a common property resource, which, in the absence of the appropriate price or quantity rationing, gives rise to inefficiency. Using a model with capital and labor as private inputs, the authors show it is optimal to tax capital even though a labor tax is available and capital is internationally mobile. Production efficiency also holds since our policy supports the first-best equilibrium despite decreasing returns to scale in private inputs.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Article provided by in its journal Public Finance Review.

Volume (Year): 35 (2007)
Issue (Month): 5 (September)
Pages: 626-642

in new window

Handle: RePEc:sae:pubfin:v:35:y:2007:i:5:p:626-642
Contact details of provider:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:35:y:2007:i:5:p:626-642. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.