Discussion paper

DP6615 Optimal Taxation with Joint Production of Agriculture and Rural Amenities

We show that, when there is joint production of an agricultural good and rural amenities, the first-best allocation of resources can be implemented with a tax on the agricultural good and some subsidies on the production factors (land and labour). The use of a subsidy on the agricultural good can only be explained by the desire of the policymaker to redistribute income from the consumers to the farmers.

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Citation

Rausser, G, L Simon and G Casamatta (2007), ‘DP6615 Optimal Taxation with Joint Production of Agriculture and Rural Amenities‘, CEPR Discussion Paper No. 6615. CEPR Press, Paris & London. https://cepr.org/publications/dp6615