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Taxation, Bequests, and Short and Long Run Timber Supplies: An Overlapping Generations Problem

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  • Gregroy Amacher
  • Richard Brazee
  • Erkki Koskela
  • Markku Ollikainen

Abstract

This paper uses an overlapping generations model with one-sided altruism to study the effects of several forest taxes that target bequests and affect timber supply. Unlike previous work, we investigate bequests and timber supply in both the short and long run when bequests are costly (e.g., taxed). The landowner's problem is examined in the short run, while the government's problem is examined in the long run assuming the existence of a steady state. We also consider taxes targeting harvests, growth, savings and bequests. Several new results are established concerning the interactions of taxes that might be used by a government to alter short and long run forest capital stocks: (i) the presence of a forest bequest tax affects the neutrality of harvest tax in both the short and long run, (ii) in the long run the bequest tax decreases bequests and timber supplies. When the bequest tax is not present, the capital income tax is neutral with respect to bequest and timber supply, while the harvest tax is neutral only if forest productivity is also not taxed. Finally, (iii) in the short run, the substitution and total effects of taxes in landowner decisions generally depend on the presence of the bequest tax. The results have implications for Pigouvian tax design and second best tax choice. Copyright Kluwer Academic Publishers 1999

Suggested Citation

  • Gregroy Amacher & Richard Brazee & Erkki Koskela & Markku Ollikainen, 1999. "Taxation, Bequests, and Short and Long Run Timber Supplies: An Overlapping Generations Problem," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(3), pages 269-288, April.
    • Handle: RePEc:kap:enreec:v:13:y:1999:i:3:p:269-288
    DOI: 10.1023/A:1008252004784
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    References listed on IDEAS

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    1. Koskela, Erkki & Ollikainen, Markku, 1995. "Tax Incidence and Optimal Forest Taxation under Stochastic Demand," Discussion Papers 99, VATT Institute for Economic Research.
    2. Karl-Gustaf Löfgren, 1991. "Another reconciliation between economists and forestry experts: OLG-arguments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 1(1), pages 83-95, March.
    3. Philippe Weil, 1987. "Love Thy Children," Post-Print hal-03393237, HAL.
    4. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, January.
    5. Galor, Oded & Ryder, Harl E., 1991. "Dynamic efficiency of steady-state equilibria in an overlapping-generations model with productive capital," Economics Letters, Elsevier, vol. 35(4), pages 385-390, April.
    6. Amacher, Gregory S. & Brazee, Richard J., 1997. "Designing Forest Taxes with Varying Government Preferences and Budget Targets," Journal of Environmental Economics and Management, Elsevier, vol. 32(3), pages 323-340, March.
    7. Toshihiro Ihori, 1996. "Public Finance in an Overlapping Generations Economy," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-38990-8.
    8. repec:hal:spmain:info:hdl:2441/8711 is not listed on IDEAS
    9. Hultkrantz, Lars, 1992. "Forestry and the bequest motive," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 164-177, March.
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    Cited by:

    1. Koskela, E. & Ollikainen, M. & Puhakka, M., 2000. "Saddles, Indeterminacy and Bifurcations in an Overlapping Generations Economy with a Renewable Resource," University of Helsinki, Department of Economics 476, Department of Economics.
    2. Koskela, Erkki & Ollikainen, Markku & Puhakka, Mikko, 2002. "Renewable Resources in an Overlapping Generations Economy Without Capital," Journal of Environmental Economics and Management, Elsevier, vol. 43(3), pages 497-517, May.
    3. Barua, Sepul K. & Kuuluvainen, Jari & Uusivuori, Jussi, 2011. "Taxation, life-time uncertainty and non-industrial private forest-owner's decision-making," Journal of Forest Economics, Elsevier, vol. 17(3), pages 267-284, August.
    4. Newman, D.H., 2002. "Forestry's golden rule and the development of the optimal forest rotation literature," Journal of Forest Economics, Elsevier, vol. 8(1), pages 5-27.
    5. Xie, Yi & Gong, Peichen & Han, Xiao & Wen, Yali, 2014. "The effect of collective forestland tenure reform in China: Does land parcelization reduce forest management intensity?," Journal of Forest Economics, Elsevier, vol. 20(2), pages 126-140.

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