Optimal Taxation with Joint Production of Agriculture and Rural Amenities
22 Pages Posted: 1 Jun 2007
Date Written: June 2007
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 labor). 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.
Keywords: joint production, rural amenities
JEL Classification: H21, Q18
Suggested Citation: Suggested Citation