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

Petrucci, Alberto (2005) The Incidence of a Tax on Pure Rent in a Small Open Economy. [Working Paper]. Università degli Studi del Molise. Dipartimento di Scienze Economiche, Gestionali e Sociali. p. 30. Economics & Statistics Discussion Papers (No. 25/05).

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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.

Item Type: Report / Paper (Working Paper)
Research documents and activity classification: Working Papers > Refereed Working Papers / of international relevance
Divisions: Department of Business and Management
Additional Information: The definitive version of the paper has been published in "Journal of Public Economics", Vol. 90(4-5), Pages 921-933, May 2006.
Uncontrolled Keywords: Land Taxation; Labor Supply; Capital Accumulation; Overlapping-generations.
MIUR Scientific Area: Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited by: Maria Teresa Nisticò
Date Deposited: 13 Dec 2010 14:16
Last Modified: 22 Apr 2015 00:13


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