Financing Public Capital When Rents Are Back: A Macroeconomic Henry George Theorem - 10.1628/fa-2018-0011 - Mohr Siebeck
Economics

Linus Mattauch, Jan Siegmeier, Ottmar Edenhofer, Felix Creutzig

Financing Public Capital When Rents Are Back: A Macroeconomic Henry George Theorem

Section: Articles
FinanzArchiv (FA)

Volume 74 () / Issue 3, pp. 340-360 (21)

21,00 € including VAT
article PDF
By taxing rents, governments can avoid a trade-off between productivity-enhancing public investment and efficiency losses from raising funds. However, it is unclear whether the rents present in a growing economy are sufficient to finance the socially optimal investment. We prove that the social optimum can be attained if the income share from a fixed factor, such as land, exceeds the public investment requirement. We thus translate the Henry George Theorem from urban economics to neoclassical and endogenous growth settings: here, the socially optimal land rent tax rate is below 100 %. Our finding may address the underfunding of national infrastructure investments.
Authors/Editors

Linus Mattauch No current data available.

Jan Siegmeier No current data available.

Ottmar Edenhofer No current data available.

Felix Creutzig No current data available.