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Optimal taxation with joint production of agriculture and rural amenities

  • Author(s): Casamatta, Georges
  • Rausser, Gordon C.
  • Simon, Leo K.
  • et al.
Abstract

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.

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