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Reexamination of Dynamic Efficiency with Taxation on Land

Author

Listed:
  • Kim, K-S.
  • Lee, J.

Abstract

This paper examines the possibility of overaccumulation of capital in an overlapping generations economy with land. With zero population growth rate, the steady state equilibrium is dynamically efficient. Imposition of property tax on land, however, distorts the arbitrage condition and can generate dynamic inefficiency, whereas a tax on rental incomes or capital gains preserves dynamic efficiency. Even with a positive growth rate in population, property tax can still generate dynamic inefficiency.

Suggested Citation

  • Kim, K-S. & Lee, J., 1996. "Reexamination of Dynamic Efficiency with Taxation on Land," Papers 96-97-03, California Irvine - School of Social Sciences.
  • Handle: RePEc:fth:calirv:96-97-03
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    References listed on IDEAS

    as
    1. Kim, Kyung-Soo & Lee, Jaewoo, 1997. "Reexamination of dynamic efficiency with taxation on land," Economics Letters, Elsevier, vol. 57(2), pages 169-175, December.
    2. 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 349-360, April.
    3. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, January.
    4. Stefan Homburg, 1991. "Interest and Growth in an Economy with Land," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 450-459, May.
    5. Changyong Rhee, 1991. "Dynamic Inefficiency in an Economy with Land," Review of Economic Studies, Oxford University Press, vol. 58(4), pages 791-797.
    6. Nichols, Donald A, 1970. "Land and Economic Growth," American Economic Review, American Economic Association, vol. 60(3), pages 332-340, June.
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    Cited by:

    1. Kim, Kyung-Soo & Lee, Jaewoo, 1997. "Reexamination of dynamic efficiency with taxation on land," Economics Letters, Elsevier, vol. 57(2), pages 169-175, December.
    2. Stefan Homburg, 2014. "Overaccumulation, Public Debt and the Importance of Land," German Economic Review, Verein für Socialpolitik, vol. 15(4), pages 411-435, November.
    3. Homburg, Stefan, 2014. "Property taxes and dynamic efficiency: A correction," Economics Letters, Elsevier, vol. 123(3), pages 327-328.

    More about this item

    Keywords

    CAPITAL; LAND; FISCAL POLICY; PROPERTY TAX;

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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