Abstract
This paper presents an econometric model to examine whether capital gains taxation has a “lock-in” effect on land use. We estimate the demand functions for agricultural land and housing land in the Urbanization Promotion Area of Japan under rational expectations using panel data on 46 prefectures. The results show regional differences in lock-in effects. Although the capital gains tax on land has a significant lock-in effect on the supply of housing land in rural prefectures, we cannot find a lock-in effect in urban prefectures. This result conforms to the theory of capital gains tax on land. Using the estimated model in rural areas, we show some simulation results for land prices and land use under alternative tax rates.J. Japan Int. Econ.,March 1997,11(1), pp. 82–104. Department of Economics, Sophia University, 7-1 Kioi-cho, Chiyoda-ku, Tokyo 102, Japan; and Department of Economics, Seikei University, 3-3-1 Kichijoji Kitamachi, Musashino, Tokyo 180, Japan.
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