This Blessed Plot: When should Capital Gains on Land be regarded as Income?

TY - JOUR

T1 - This Blessed Plot

T2 - When should Capital Gains on Land be regarded as Income?

AU - Weale, Martin

PY - 2019/1/7

Y1 - 2019/1/7

N2 - National balance sheets for a number of advanced economies show land to be a valuable form of natural capital, whose value has increased sharply over the last twenty years or so. This paper investigates when or whether capital gains on land should be counted as a component of income. While development projects can lead to increases in rental rates and land values, it is shown that, while the benefits any project should be counted as income, increases in rental rates and land values should not normally be seen as additional real income. However if land benefits from exogenous land-saving technical progress the resulting capital gains can be seen as income. Applying the same principle to human capital it is shown, on a steady growth path, that these capital gains are equal to Weitzman's (1997) growth premium in the relationship between income and sustainable consumption.

AB - National balance sheets for a number of advanced economies show land to be a valuable form of natural capital, whose value has increased sharply over the last twenty years or so. This paper investigates when or whether capital gains on land should be counted as a component of income. While development projects can lead to increases in rental rates and land values, it is shown that, while the benefits any project should be counted as income, increases in rental rates and land values should not normally be seen as additional real income. However if land benefits from exogenous land-saving technical progress the resulting capital gains can be seen as income. Applying the same principle to human capital it is shown, on a steady growth path, that these capital gains are equal to Weitzman's (1997) growth premium in the relationship between income and sustainable consumption.

KW - capital gains

KW - land

KW - real income

KW - technical progress

UR - http://www.scopus.com/inward/record.url?scp=85062689556&partnerID=8YFLogxK

U2 - 10.1093/oxrep/gry026

DO - 10.1093/oxrep/gry026

M3 - Review article

SN - 0266-903X

VL - 35

SP - 37

EP - 53

JO - OXFORD REVIEW OF ECONOMIC POLICY

JF - OXFORD REVIEW OF ECONOMIC POLICY

IS - 1

ER -