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Optimal taxation of a monopolistic extractor: Are subsidies necessary?

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  • Daubanes, Julien

Abstract

This note reconsiders the optimal taxation problem when extraction of an exhaustible resource is monopolistic. In a standard model, I explicitly characterize and examine all the efficiency-inducing paths of taxes/subsidies on the resource. Consistently with the literature, there is a family of such optimal paths. In contrast with Im (2002), it may not be necessary to subsidize the monopoly at any date: within the family of optimal paths of taxes/subsidies, there may exist some paths along which the regulator raises positive revenues at all dates. This illustrates how the static trade-off between inducing efficiency and raising tax revenues in the presence of market power is relaxed under exhaustibility.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 3 (May)
Pages: 399-403

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:3:p:399-403

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Web page: http://www.elsevier.com/locate/eneco

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Keywords: Exhaustible resources Optimal taxation Imperfect competition;

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  1. Benchekroun, Hassan & Van Long, Ngo, 2002. "On the multiplicity of efficiency-inducing tax rules," Economics Letters, Elsevier, vol. 76(3), pages 331-336, August.
  2. DAUBANES Julien & GRIMAUD André, 2006. "On the North-South Effects of Environmental Policy: Rent Transfers, Relocation and Growth," LERNA Working Papers 06.26.219, LERNA, University of Toulouse.
  3. Karp, Larry & Livernois, John, 1992. "On efficiency-inducing taxation for a non-renewable resource monopolist," Journal of Public Economics, Elsevier, vol. 49(2), pages 219-239, November.
  4. Gaudet, Gérard & Lasserre, Pierre, 1990. "Dynamiques comparées des effets de la taxation minière," L'Actualité Economique, Société Canadienne de Science Economique, vol. 66(4), pages 467-497, décembre.
  5. Hassan Benchekroun & Ngo Van Long, 2004. "Designing a Performance Indicator to Economize on Monopoly Subsidy," CIRANO Working Papers 2004s-08, CIRANO.
  6. Gaudet, Gerard & Lasserre, Pierre, 1988. "On comparing monopoly and competition in exhaustible resource exploitation," Journal of Environmental Economics and Management, Elsevier, vol. 15(4), pages 412-418, December.
  7. Lewis, Tracy & Matthews, Steven A. & Burness, H. Stuart., . "Monopoly and the Rate of Extraction of Exhaustible Resources: Notes," Working Papers 137, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Benchekroun, Hassan & van Long, Ngo, 1998. "Efficiency inducing taxation for polluting oligopolists," Journal of Public Economics, Elsevier, vol. 70(2), pages 325-342, November.
  9. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
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  11. Gamponia, Villamor & Mendelsohn, Robert, 1985. "The Taxation of Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 165-81, February.
  12. Bergstrom, Theodore C. & Cross, John G. & Porter, Richard C., 1981. "Efficiency-inducing taxation for a monopolistically supplied depletable resource," Journal of Public Economics, Elsevier, vol. 15(1), pages 23-32, February.
  13. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
  14. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-61, September.
  15. Tullock, Gordon, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 231-33, March.
  16. Im, Jeong-Bin, 2002. "Optimal taxation of exhaustible resource under monopoly," Energy Economics, Elsevier, vol. 24(3), pages 183-197, May.
  17. Yucel, Mine Kuban, 1989. "Severance taxes and market structure in an exhaustible resource industry," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 134-148, March.
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Cited by:
  1. Daubanes, Julien, 2009. "Changement climatique, instruments économiques et propositions pour un accord post-Kyoto: une synthèse," TSE Working Papers 09-006, Toulouse School of Economics (TSE).
  2. Julien Daubanes, 2008. "Fossil fuels supplied by oligopolies: On optimal taxation and rent capture," Economics Bulletin, AccessEcon, vol. 17(13), pages 1-11.
  3. Leonard Leung & Glenn Jenkins, 2013. "An Economic Evaluation of Peru's LNG Export Policy," Development Discussion Papers 2013-03, JDI Executive Programs.
  4. Herrmann, Markus & Nkuiya, Bruno & Dussault, Anne-Renée, 2013. "Innovation and antibiotic use within antibiotic classes: Market incentives and economic instruments," Resource and Energy Economics, Elsevier, vol. 35(4), pages 582-598.
  5. repec:ebl:ecbull:v:17:y:2008:i:13:p:1-11 is not listed on IDEAS

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