Working Paper: CEPR ID: DP6615
Authors: Georges Casamatta; Gordon Rausser; Leo K. Simon
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 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.
Keywords: joint production; rural amenities
JEL Codes: H21; H23; Q10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax on agricultural goods (Q18) | Optimal resource allocation (D61) |
| Subsidy on agricultural output (Q12) | Redistribution of income towards farmers (D33) |
| High subsidy rates (H23) | Income redistribution towards farmers (H23) |