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The Effects of Changes in Capital Gains Taxes on Land Sales: Empirical Evidence from Finland

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  • Kyösti Pietola
  • Sami Myyrä
  • Eija Pouta

Abstract

We estimate the landowner response to and fiscal effects of a temporary reduction in capital gains taxes imposed on land sales. The underlying normative decision rules are first derived and solved numerically using stochastic dynamic programming. The landowner preferences and willingness to sell land are then estimated in the reduced form using survey data from Finland. The results suggest that the timing of land sales and land sales quantities respond significantly to tax incentives. Certain temporary tax waiver programs could maintain the current tax revenues with fewer trade distorting effects on the land market.

Suggested Citation

  • Kyösti Pietola & Sami Myyrä & Eija Pouta, 2011. "The Effects of Changes in Capital Gains Taxes on Land Sales: Empirical Evidence from Finland," Land Economics, University of Wisconsin Press, vol. 87(4), pages 582-594.
  • Handle: RePEc:uwp:landec:v:87:y:2011:iv:1:p:582-594
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    References listed on IDEAS

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    1. Gourio, François, 2009. "Is there a majority to support a capital tax cut?," Journal of Economic Dynamics and Control, Elsevier, vol. 33(6), pages 1278-1295, June.
    2. Yoder, Jonathan & Hossain, Ishrat & Epplin, Francis & Doye, Damona, 2008. "Contract duration and the division of labor in agricultural land leases," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 714-733, March.
    3. Sami Myyrä & Eija Pouta, 2010. "Farmland Owners’ Land Sale Preferences: Can They Be Affected by Taxation Programs?," Land Economics, University of Wisconsin Press, vol. 86(2), pages 245-262.
    4. Sami Myyrä & Elise Ketoja & Markku Yli-Halla & Kyöisti Pietola, 2005. "Land Improvements under Land Tenure Insecurity: The Case of pH and Phosphate in Finland," Land Economics, University of Wisconsin Press, vol. 81(4).
    5. Myyra, Sami & Pietola, Kyosti & Yli-Halla, Markku, 2007. "Exploring long-term land improvements under land tenure insecurity," Agricultural Systems, Elsevier, vol. 92(1-3), pages 63-75, January.
    6. Zhonglan Dai & Edward Maydew & Douglas A. Shackelford & Harold H. Zhang, 2008. "Capital Gains Taxes and Asset Prices: Capitalization or Lock-in?," Journal of Finance, American Finance Association, vol. 63(2), pages 709-742, April.
    7. Meredith J. Soule & Abebayehu Tegene & Keith D. Wiebe, 2000. "Land Tenure and the Adoption of Conservation Practices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 993-1005.
    8. Myyra, Sami & Pietola, Kyosti, 2005. "Land Improvements Under Land Tenure Insecurity: The Case of Liming in Finland," 94th Seminar, April 9-10, 2005, Ashford, UK 24418, European Association of Agricultural Economists.
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    Cited by:

    1. Myyrä, Sami, & Pietola, Kyosti & Heikkilä, Anna-Maija, 2011. "Farm Level Capital: Capital positions, structures, the dynamics of farm level investments, capital accumulation and leverage positions," Factor Markets Working Papers 105, Centre for European Policy Studies.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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