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On the Optimal Taxation of an Exhaustible Resource Under Monopolistic Extraction

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  • Daubanes, J.

    (Tilburg University, Center for Economic Research)

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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Bibliographic Info

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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Web page: http://center.uvt.nl

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Keywords: Exhaustible resources; Imperfect competition; Optimal taxation;

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  1. 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.
  2. 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.
  3. 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.
  4. Hassan Benchekroun & Ngo Van Long, 1997. "Efficiency Inducing Taxation for Polluting Oligopolists," CIRANO Working Papers 97s-21, CIRANO.
  5. 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.
  6. 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.
  7. Hassan Benchekroun & Ngo Van Long, 2007. "A Class Of Performance-Based Subsidy Rules," Departmental Working Papers 2007-05, McGill University, Department of Economics.
  8. Gamponia, Villamor & Mendelsohn, Robert, 1985. "The Taxation of Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 165-81, February.
  9. Benchekroun, Hassan & Van Long, Ngo, 2002. "On the multiplicity of efficiency-inducing tax rules," Economics Letters, Elsevier, vol. 76(3), pages 331-336, August.
  10. 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.
  11. Julien Daubanes & André Grimaud, 2010. "Taxation of a Polluting Non-renewable Resource in the Heterogeneous World," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(4), pages 567-588, December.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  16. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  17. 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.
  18. Im, Jeong-Bin, 2002. "Optimal taxation of exhaustible resource under monopoly," Energy Economics, Elsevier, vol. 24(3), pages 183-197, May.
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Citations

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Cited by:
  1. Julien Daubanes, 2008. "Fossil fuels supplied by oligopolies: On optimal taxation and rent capture," Economics Bulletin, AccessEcon, vol. 17(13), pages 1-11.
  2. 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.
  3. 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).
  4. Leonard Leung & Glenn Jenkins, 2013. "An Economic Evaluation of Peru's LNG Export Policy," Development Discussion Papers 2013-03, JDI Executive Programs.
  5. repec:ebl:ecbull:v:17:y:2008:i:13:p:1-11 is not listed on IDEAS

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