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- Title
Land tax and economic growth under credit market imperfection.
- Authors
Sakuragawa, Masaya; Sakuragawa, Yukie
- Abstract
We study the general equilibrium effects of land taxation on economic growth by extending the model developed by Kiyotaki and Moore (1997) to an endogenous growth model, where land is used not only as an input of production but also as collateral. Land taxation tends to hamper economic growth through the credit-contraction effect, but the overall direction on economic growth depends on the redistribution scheme of the tax revenue. Surprisingly, we show that if the tax revenue is fully refunded to entrepreneurs, the economy grows faster than a no-taxation economy. We calibrate our model and show that if taxation on land is raised by 1 percent, the land price initially falls by approximately 9.09 percent, while the economy grows faster by 0.6%.
- Subjects
LAND value taxation; REAL property tax; SINGLE tax; ENTREPRENEURSHIP; ECONOMIC indicators; ECONOMIC demand
- Publication
International Journal of Economic Theory, 2007, Vol 3, Issue 2, p131
- ISSN
1742-7355
- Publication type
Article
- DOI
10.1111/j.1742-7363.2007.00051.x