DP6615 Optimal Taxation with Joint Production of Agriculture and Rural Amenities

Author(s): Georges Casamatta, Gordon Rausser, Leo K Simon
Publication Date: December 2007
Keyword(s): joint production, rural amenities
JEL(s): H21, H23, Q10
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6615

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.