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On the Optimal Taxation of an Exhaustible Resource Under Monopolistic Extraction

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Author Info
Daubanes, J. (Tilburg University, Center for Economic Research)

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Abstract

In a simple model of resource depletion (isoelastic demand and constant unit extraction cost), we fully characterize the set of linear effiency-inducing tax/subsidy schemes. We show that this set is infinite and all the larger as the cost of extraction is low. Depending on the magnitude of the latter, we show that there may exist optimal linear strict taxes, thus allowing the regulator to induce efficiency without subsidizing the mine industry at any date. We illustrate and argue that the exhaustibility constraint the monopolist extractor faces can be exploited by the regulator to relax the standard trade-off between inducing efficiency and raising revenues from the monopoly.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2007-34.

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Date of creation: 2007
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Handle: RePEc:dgr:kubcen:200734

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Find related papers by JEL classification:
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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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. DAUBANES Julien & GRIMAUD André, 2006. "On the North-South Effects of Environmental Policy: Rent Transfers, Relocation and Growth," Working Papers 06.26.219, LERNA, University of Toulouse. [Downloadable!]
  2. Lewis, Tracy R & Matthews, Steven A & Burness, H Stuart, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 227-30, March.
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  3. Benchekroun, Hassan & Van Long, Ngo, 2002. "On the multiplicity of efficiency-inducing tax rules," Economics Letters, Elsevier, vol. 76(3), pages 331-336, August. [Downloadable!] (restricted)
  4. Ted Bergstrom, 1982. "On Capturing Oil Rents with a National Excise Tax," University of California at Santa Barbara, Economics Working Paper Series 1982A, Department of Economics, UC Santa Barbara. [Downloadable!]
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  5. 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. [Downloadable!] (restricted)
  6. Gamponia, Villamor & Mendelsohn, Robert, 1985. "The Taxation of Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 165-81, February. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
  9. Benchekroun, Hassan & van Long, Ngo, 1998. "Efficiency inducing taxation for polluting oligopolists," Journal of Public Economics, Elsevier, vol. 70(2), pages 325-342, November. [Downloadable!] (restricted)
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  10. 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.
  11. Im, Jeong-Bin, 2002. "Optimal taxation of exhaustible resource under monopoly," Energy Economics, Elsevier, vol. 24(3), pages 183-197, May. [Downloadable!] (restricted)
  12. 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. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
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  1. DAUBANES Julien, 2007. "Fossil fuels supplied by oligopolies : On optimal taxation and rent capture," Working Papers 07.22.243, LERNA, University of Toulouse. [Downloadable!]
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