Land and capital serve not only as factors of production but as assets which households use as stores of value. Standard trade models typically recognize only the first role. In its role as an asset land reduces the amount of national savings available for capital investment. Foreign investment affects the national economy through both asset markets and factor markets. When the share of labor in the land-using sectoris large relative to the labor share in the capital-using sector, factor-market effects are likely to dominate. In this case a drop in the price of the agricultural good or a rise in the land-labor ratio attracts foreign investment, while a drop in the world interest rate raises the welfare of a capital-importing country. If the share of labor in the land-using sector is smaller, however, asset-market effects dominate. These results are then likely to be reversed. Even when trade in claims on land equalizes the domestic and world interest rates, a tax on land raises steady-state welfare.
|Date of creation:||Dec 1984|
|Date of revision:|
|Publication status:||published as From The American Economic Review, Vol. 78, No. 1, pp. 76-88, (March 1988).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jonathan Eaton, 1987.
"A Dynamic Specific-Factors Model of International Trade,"
Review of Economic Studies,
Oxford University Press, vol. 54(2), pages 325-338.
- Jonathan Eaton, 1984. "A Dynamic Specific-Factors Model of International Trade," NBER Working Papers 1479, National Bureau of Economic Research, Inc.
- Bhagwati, Jagdish N. & Tironi, Ernesto, 1980. "Tariff change, foreign capital and immiserization : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 7(1), pages 71-83, February.
- John Dutton, 1982. "The Optimal Taxation of International Investment Income: A Comment," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 373-380.
- Christophe Chamley & Wright, Brian D. Wright, 1983. "Fiscal Incidence in a Dynamic Life-Cycle Model with Land," Cowles Foundation Discussion Papers 666, Cowles Foundation for Research in Economics, Yale University.
- Buiter, Willem H, 1981.
"Time Preference and International Lending and Borrowing in an Overlapping-Generations Model,"
Journal of Political Economy,
University of Chicago Press, vol. 89(4), pages 769-97, August.
- Willem H. Buiter, 1979. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," NBER Working Papers 0352, National Bureau of Economic Research, Inc.
- Calvo, Guillermo A & Kotlikoff, Laurence J & Rodriguez, Carlos Alfredo, 1979.
"The Incidence of a Tax on Pure Rent: A New (?) Reason for an Old Answer,"
Journal of Political Economy,
University of Chicago Press, vol. 87(4), pages 869-74, August.
- 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.
- Bhagwati, Jagdish N. & Brecher, Richard A., 1980.
"National welfare in an open economy in the presence of foreign-owned factors of production,"
Journal of International Economics,
Elsevier, vol. 10(1), pages 103-115, February.
- J. Bhagwati & R. Brecher, 1978. "National Welfare in an Open Economy in the Presence of Foreign Owned Factors of Production," Working papers 224, Massachusetts Institute of Technology (MIT), Department of Economics.
- 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.
- Srinivasan, T. N., 1983. "International factor movements, commodity trade and commercial policy in a specific factor model," Journal of International Economics, Elsevier, vol. 14(3-4), pages 289-312, May.
- Kareken, John & Wallace, Neil, 1977. "Portfolio autarky: A welfare analysis," Journal of International Economics, Elsevier, vol. 7(1), pages 19-43, February.
- Brecher, Richard A. & Findlay, Ronald, 1983. "Tariffs, foreign capital and national welfare with sector-specific factors," Journal of International Economics, Elsevier, vol. 14(3-4), pages 277-288, May.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1512. 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: ()
If references are entirely missing, you can add them using this form.