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This blessed plot: when should capital gains on land be regarded as income

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  • Martin Weale

Abstract

National balance sheets for a number of advanced economies show land to be a valuable form of natural capital, whose value has increased sharply over the last twenty years or so. This paper investigates when or whether capital gains on land should be counted as a component of income. While development projects can lead to increases in rental rates and land values, it is shown that, although the benefits any project should be counted as income, increases in rental rates and land values should not normally be seen as additional real income. However if land benefits from exogenous land-saving technical progress the resulting capital gains can be seen as income. Applying the same principle to human capital it is shown, on a steady growth path, that these capital gains are equal to Weitzman’s (1997) growth premium in the relationship between income and sustainable consumption.

Suggested Citation

  • Martin Weale, 2019. "This blessed plot: when should capital gains on land be regarded as income," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 35(1), pages 37-53.
    • Handle: RePEc:oup:oxford:v:35:y:2019:i:1:p:37-53.
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    File URL: http://hdl.handle.net/10.1093/oxrep/gry026
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    Cited by:

    1. Peiyu Zhao & Jiajun Xu, 2024. "Analysis of Residents’ Livelihoods in Transformed Shantytowns: A Case Study of a Resource-Based City in China," Sustainability, MDPI, vol. 16(4), pages 1-25, February.
    2. Dieter Helm, 2019. "Natural capital: assets, systems, and policies," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 35(1), pages 1-13.

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