The Incidence of a Tax on Pure Rent in a Small Open Economy
Alberto Petrucci (albpetru@luiss.it)
Economics & Statistics Discussion Papers from University of Molise, Department of Economics
Abstract:
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.
Keywords: Land Taxation; Labor Supply; Capital Accumulation; Overlapping generations. (search for similar items in EconPapers)
JEL-codes: E21 E62 H22 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2005-07-12
New Economics Papers: this item is included in nep-mac and nep-pbe
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Related works:
Journal Article: The incidence of a tax on pure rent in a small open economy (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:mol:ecsdps:esdp05025
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