Optimal Forest Taxation Under Private and Social Amenity Valuation

29 Pages Posted: 21 Mar 2001

See all articles by Erkki Koskela

Erkki Koskela

University of Helsinki - Department of Political and Economic Studies; CESifo (Center for Economic Studies and Ifo Institute); Bank of Finland - Research Department; IZA Institute of Labor Economics

Markku Ollikainen

University of Helsinki - Department of Political and Economic Studies

Date Written: January 2001

Abstract

This paper analyzes socially optimal forest taxation when the government has a binding tax revenue requirement. In the Faustmann model the optimal design of forest taxation consists of non-distortionary taxes, such as site productivity tax, site value tax or profit tax. A combination of distortionary unit (or yield) tax and timber tax can also be used to collect the tax revenue in a non-distortionary way. In the Hartman model with amenity services as a public good, the optimal design consists of a non-distortionary tax and a Pigouvian tax, which adjusts the private rotation age to the socially optimal one. Now only the site productivity tax is non-distortionary, while unit, yield, timber, site value and profit taxes generally serve as a corrective Pigouvian taxes. In the absence of a non-distortionary tax, a combination of unit (or yield) and timber taxes can often be used to both tax revenue collection and Pigouvian correction.

JEL Classification: Q23, H21

Suggested Citation

Koskela, Erkki and Ollikainen, Markku, Optimal Forest Taxation Under Private and Social Amenity Valuation (January 2001). Available at SSRN: https://ssrn.com/abstract=263118 or http://dx.doi.org/10.2139/ssrn.263118

Erkki Koskela (Contact Author)

University of Helsinki - Department of Political and Economic Studies ( email )

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Bank of Finland - Research Department ( email )

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IZA Institute of Labor Economics

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Markku Ollikainen

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

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