This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Optimal Resource Extraction Contracts under Threat of Expropriation

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Eduardo Engel () (Cowles Foundation, Yale University)
Ronald Fischer (University of Chile)

Additional information is available for the following registered author(s):

Abstract

The government contracts with a foreign firm to extract a natural resource that requires an upfront investment and which faces price uncertainty. In states where profits are high, there is a likelihood of expropriation, which generates a social cost that increases with the expropriated value. In this environment, the planner's optimal contract avoids states with high probability of expropriation. The contract can be implemented via a competitive auction with reasonable informational requirements. The bidding variable is a cap on the present value of discounted revenues, and the firm with the lowest bid wins the contract. The basic framework is extended to incorporate government subsidies, unenforceable investment effort and political moral hazard, and the general thrust of the results described above is preserved.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://cowles.econ.yale.edu/P/cd/d16a/d1636.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1636.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 32 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:cwl:cwldpp:1636

Contact details of provider:
Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
More information through EDIRC

Order Information:
Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

For technical questions regarding this item, or to correct its listing, contact: (Glena Ames).

Related research
Keywords: Taxation Mining Rent extraction Royalty Non-renewable natural resource Present-value-of-revenue auction

Other versions of this item:

Find related papers by JEL classification:
Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Boadway, Robin & Flatters, Frank, 1993. "The taxation of natural resources : principles and policy issues," Policy Research Working Paper Series 1210, The World Bank. [Downloadable!]
  2. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2007. "The Basic Public Finance of Public-Private Partnerships," Documentos de Trabajo 234, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
    Other versions:
  3. Salant, Stephen W, 1995. "The Economics of Natural Resource Extraction: A Primer for Development Economists," World Bank Research Observer, Oxford University Press, vol. 10(1), pages 93-111, February.
  4. Henning Bohn & Robert T. Deacon, 2000. "Ownership Risk, Investment, and the Use of Natural Resources," American Economic Review, American Economic Association, vol. 90(3), pages 526-549, June. [Downloadable!] (restricted)
    Other versions:
  5. Eduardo M. R. A. Engel & Ronald D. Fischer & Alexander Galetovic, 2001. "Least-Present-Value-of-Revenue Auctions and Highway Franchising," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 993-1020, October. [Downloadable!] (restricted)
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? RePEc data is maintained by each archive holder on its own website. Nothing is held centrally.

This page was last updated on 2008-7-18.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.