Pure Rent Taxation and Growth in a Two-Sector Open Economy

Alberto Petrucci ()

No 1501, Working Papers CELEG from Dipartimento di Economia e Finanza, LUISS Guido Carli

Abstract: In this paper, the incidence of a tax on pure rent is analyzed in an OLG two-sector small open economy, in which one sector produces a capital good and one sector a consumer good. Contrary to what is obtained by Feldstein (1977) in a one-sector closed economy, a rent tax does not necessarily foster wealth accumulation and economic growth. The accommodating scheme for the government budget plays a crucial role for the effects of pure rent taxation. A rent tax stimulates nonhuman wealth if distortionary taxes on wealth or on income from nonland inputs are alleviated. The mechanism spurring capital formation is brought into action, instead, only when the rent tax is matched by a fall in capital taxation or, if the capital sector is capital intensive, by an increase in government spending on the capital good.

Keywords: Land Rent Tax; Capital Good; Consumer Good; OLG; Wealth Accumulation. (search for similar items in EconPapers)
JEL-codes: E62 H22 J22 O41 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-mac and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://static.luiss.it/RePEc/pdf/celegw/1501.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lui:celegw:1501

Access Statistics for this paper

More papers in Working Papers CELEG from Dipartimento di Economia e Finanza, LUISS Guido Carli Contact information at EDIRC.
Bibliographic data for series maintained by Paolo Giordani ( this e-mail address is bad, please contact ).