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Reexamination of dynamic efficiency with taxation on land

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  • Kim, Kyung-Soo
  • Lee, Jaewoo

Abstract

This paper examines the possibility of overaccumulation of capital in an overlapping generations economy with land. With zero population growth rate, the steady state equilibrium is dynamically efficient. Imposition of property tax on land, however, distorts the arbitrage condition and can generate dynamic inefficiency, whereas a tax on rental incomes or capital gains preserves dynamic efficiency. Even with a positive growth rate in population, property tax can still generate dynamic inefficiency.
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Suggested Citation

  • Kim, Kyung-Soo & Lee, Jaewoo, 1997. "Reexamination of dynamic efficiency with taxation on land," Economics Letters, Elsevier, vol. 57(2), pages 169-175, December.
    • Handle: RePEc:eee:ecolet:v:57:y:1997:i:2:p:169-175
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    References listed on IDEAS

    as
    1. Kim, Kyung-Soo & Lee, Jaewoo, 1997. "Reexamination of dynamic efficiency with taxation on land," Economics Letters, Elsevier, vol. 57(2), pages 169-175, December.
    2. 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 349-360, April.
    3. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, April.
    4. Stefan Homburg, 1991. "Interest and Growth in an Economy with Land," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 450-459, May.
    5. Changyong Rhee, 1991. "Dynamic Inefficiency in an Economy with Land," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(4), pages 791-797.
    6. Nichols, Donald A, 1970. "Land and Economic Growth," American Economic Review, American Economic Association, vol. 60(3), pages 332-340, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Odran Bonnet & Guillaume Chapelle & Alain Trannoy & Etienne Wasmer, 2019. "Secular Trends in Wealth and Heterogeneous Capital: Land is Back... and Should Be Taxed," Sciences Po publications 2019-14, Sciences Po.
    2. Kim, Kyung-Soo & Lee, Jaewoo, 1997. "Reexamination of dynamic efficiency with taxation on land," Economics Letters, Elsevier, vol. 57(2), pages 169-175, December.
    3. repec:hal:spmain:info:hdl:2441/3bhpicpe2q8a090eu5p3dvakb6 is not listed on IDEAS
    4. Stefan Homburg, 2014. "Overaccumulation, Public Debt and the Importance of Land," German Economic Review, Verein für Socialpolitik, vol. 15(4), pages 411-435, November.
    5. repec:hal:spmain:info:hdl:2441/1eob9f9aas9q18hfjsiqhggvi2 is not listed on IDEAS
    6. Odran Bonnet & Guillaume Flamerie de La Chapelle & Alain Trannoy & Etienne Wasmer, 2019. "Secular Trends in Wealth and Heterogeneous Capital: Land is Back... and Should Be Taxed," Working Papers hal-03570837, HAL.
    7. repec:hal:spmain:info:hdl:2441/56k383m9o9kpb1g6f8rvv74ok is not listed on IDEAS
    8. Odran Bonnet & Guillaume Flamerie de la Chapelle & Alain Trannoy & Etienne Wasmer, 2019. "Secular trends in Wealth and Heterogeneous Capital: Land is back...and should be taxed," SciencePo Working papers hal-03541411, HAL.
    9. Odran Bonnet, 2018. "Individual housing choices and aggregate housing prices: discrete choice models revisited with matching models," Sciences Po publications info:hdl:2441/3bhpicpe2q8, Sciences Po.
    10. repec:hal:wpspec:info:hdl:2441/1eob9f9aas9q18hfjsiqhggvi2 is not listed on IDEAS
    11. Hellwig, Martin F., 2020. "Property taxes and dynamic inefficiency: A correction of a “correction”," Economics Letters, Elsevier, vol. 197(C).
    12. Homburg, Stefan, 2014. "Property taxes and dynamic efficiency: A correction," Economics Letters, Elsevier, vol. 123(3), pages 327-328.
    13. Selahattin Imrohoroglu, 2023. "Mpk," CIGS Working Paper Series 24-002E, The Canon Institute for Global Studies.

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    More about this item

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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