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Rent Taxation in a Small Open Economy: The Effect on Transitional Generations

Author

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  • Koethenbuerger, Marko

    () (CESifo)

  • Poutvaara, Panu

    () (University of Munich)

Abstract

We show that taxation of rents may yield an intergenerational Pareto-improvement in a small open economy provided tax revenues are earmarked to reduce wage taxes. Previous literature has shown that rent taxation benefits current young and future generations, while we show that it also benefits the current old generation when the initially prevailing tax mix is sufficiently skewed towards wage taxation.

Suggested Citation

  • Koethenbuerger, Marko & Poutvaara, Panu, 2007. "Rent Taxation in a Small Open Economy: The Effect on Transitional Generations," IZA Discussion Papers 2559, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2559
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    Keywords

    capitalization; transitional dynamics; labor supply; asset prices; rent taxes;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F02 - International Economics - - General - - - International Economic Order and Integration

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