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Hypergeorgism: When is Rent Taxation as a Remedy for Insufficient Capital Accumulation Socially Optimal?

Author

Listed:
  • Ottmar Edenhofer
  • Linus Mattauch
  • Jan Siegmeier

Abstract

Imperfect altruism between generations may lead to insufficient capital accumulation. We study the welfare consequences of taxing the rent on a fixed production factor, such as land, in this setting. We prove that taxing the rent is welfare-enhancing as it increases capital investment. This holds for any tax level and any recycling of the tax revenues except for combinations of high taxes and strongly redistributive recycling. Specific forms of redistribution of the land rent tax - a capital subsidy or a transfer directed at fundless newborns – allow to reproduce the social optimum under parameter restrictions valid for most economies.

Suggested Citation

  • Ottmar Edenhofer & Linus Mattauch & Jan Siegmeier, 2013. "Hypergeorgism: When is Rent Taxation as a Remedy for Insufficient Capital Accumulation Socially Optimal?," CESifo Working Paper Series 4144, CESifo.
    • Handle: RePEc:ces:ceswps:_4144
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jan Siegmeier & Linus Mattauch & Max Franks & David Klenert & Anselm Schultes & Ottmar Edenhofer, 2015. "A Public Finance Perspective on Climate Policy: Six Interactions That May Enhance Welfare," Working Papers 2015.31, Fondazione Eni Enrico Mattei.
    2. Viguie, V. & Hallegatte, S., 2014. "Urban infrastructure investment and rent-capture potentials," Policy Research Working Paper Series 7067, The World Bank.
    3. Ottmar Edenhofer & Jan Christoph Steckel & Michael Jakob, 2014. "Does Environmental Sustainability Contradict Prosperity?," Global Policy, London School of Economics and Political Science, vol. 5, pages 15-20, October.
    4. Barth, Jonathan & Richters, Oliver & Siemoneit, Andreas, 2018. "Wider den Wachstumszwang: Institutionelle Auswege aus einem sozialen und ökologischen Dilemma," ZOE Discussion Papers 1, ZOE. institute for future-fit economies, Bonn.
    5. Michael Jakob & Claudine Chen & Sabine Fuss & Annika Marxen & Narasimha Rao & Ottmar Edenhofer, 2015. "Using Carbon Pricing Revenues to Finance Infrastructure Access," Working Papers 2015.94, Fondazione Eni Enrico Mattei.
    6. Fuss, Sabine & Chen, Claudine & Jakob, Michael & Marxen, Annika & Rao, Narasimha D. & Edenhofer, Ottmar, 2016. "Could resource rents finance universal access to infrastructure? A first exploration of needs and rents," Environment and Development Economics, Cambridge University Press, vol. 21(6), pages 691-712, December.
    7. Jan Siegmeier & Linus Mattauch & Ottmar Edenhofer, 2015. "Climate Policy Enhances Efficiency: A Macroeconomic Portfolio Effect," CESifo Working Paper Series 5161, CESifo.
    8. Avner, Paolo & Rentschler, Jun & Hallegatte, Stephane, 2014. "Carbon price efficiency : lock-in and path dependence in urban forms and transport infrastructure," Policy Research Working Paper Series 6941, The World Bank.
    9. Linus Mattauch & Jan Siegmeier & Ottmar Edenhofer & Felix Creutzig, 2013. "Financing Public Capital through Land Rent Taxation: A Macroeconomic Henry George Theorem," CESifo Working Paper Series 4280, CESifo.

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    More about this item

    Keywords

    land rent tax; overlapping generations; revenue recycling; social optimum; underaccumulation;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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