Optimal taxation of a monopolistic extractor: Are subsidies necessary?
AbstractThis 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 InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 33 (2011)
Issue (Month): 3 (May)
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Web page: http://www.elsevier.com/locate/eneco
Exhaustible resources Optimal taxation Imperfect competition;
Other versions of this item:
- Julien Daubanes, 2008. "Optimal taxation of a monopolistic extractor: are subsidies necessary?," CER-ETH Economics working paper series 08/92, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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