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The Incidence of a Tax on Pure Rent in a Small Open Economy

  • Petrucci, Alberto

    ()

This paper analyzes the effects of a land rent tax on capital formation and foreign investment in a life-cycle small open economy with endogenous labor-leisure choices. The consequences of land taxation critically depend on how the tax proceeds are used by the government. A land tax depresses capital formation, crowds out foreign investment and increases national wealth and consumption when the land tax revenues are distributed as lump-sum payments. If the proceeds from land taxation are used to finance unproductive government expenditure, the land tax will be neutral in its effects on the capital stock, nonhuman wealth and labor. When the tax revenues are used to reduce labor taxes, the land rent tax spurs nonhuman wealth accumulation and ambiguously affects the capital stock and labor.

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File URL: http://web.unimol.it/progetti/repec/mol/ecsdps/ESDP05025.pdf
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Paper provided by University of Molise, Dept. EGSeI in its series Economics & Statistics Discussion Papers with number esdp05025.

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Length: 31 pages
Date of creation: 12 Jul 2005
Date of revision:
Handle: RePEc:mol:ecsdps:esdp05025
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  1. Ihori, Toshihiro, 1990. "Economic effects of land taxes in an inflationary economy," Journal of Public Economics, Elsevier, vol. 42(2), pages 195-211, July.
  2. Guillermo A. Galvo & Laurence J. Kotlikoff & Carlos Alfredo Rodriguez, 1978. "The Incidence of a Tax on Pure Rent: A New Reason for an Old Answer," UCLA Economics Working Papers 125, UCLA Department of Economics.
  3. Bentick, Brian L, 1979. "The Impact of Taxation and Valuation Practices on the Timing and Efficiency of Land Use," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 859-68, August.
  4. Eaton, Jonathan, 1988. "Foreign-Owned Land," American Economic Review, American Economic Association, vol. 78(1), pages 76-88, March.
  5. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  6. Kangoh Lee, 2003. "Should land and capital be taxed at a uniform rate?," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 350-372, May.
  7. Laurence J. Kotlikoff & Lawrence H. Summers, 1986. "Tax Incidence," NBER Working Papers 1864, National Bureau of Economic Research, Inc.
    • Kotlikoff, Laurence J. & Summers, Lawrence H., 1987. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 16, pages 1043-1092 Elsevier.
  8. Buiter, Willem H., 1989. "Debt neutrality, Professor Vickrey and Henry George's 'single tax'," Economics Letters, Elsevier, vol. 29(1), pages 43-47.
  9. Mills, David E., 2001. "Land value taxation," Regional Science and Urban Economics, Elsevier, vol. 31(6), pages 765-770, November.
  10. 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 349-60, April.
  11. Fane, George, 1984. "The Incidence of a Tax on Pure Rent: The Old Reason for the Old Answer," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 329-33, April.
  12. Hiroyuki Hashimoto & Masaya Sakuragawa, 1998. "Land-Tax, Transfer and Growth in an Endogenously Growing Economy with Overlapping Generations," The Japanese Economic Review, Japanese Economic Association, vol. 49(4), pages 412-425, December.
  13. Chamley, Christophe & Wright, Brian D., 1987. "Fiscal incidence in an overlapping generations model with a fixed asset," Journal of Public Economics, Elsevier, vol. 32(1), pages 3-24, February.
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