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Endogenous Growth, Asymmetric Trade and Resource Taxation

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Abstract

Since 1980, the aggregate income of oil-exporting countries relative to that of oil- poor countries has been remarkably constant despite structural gaps in productivity growth rates. This stylized fact is analyzed in a two-country model where resource- poor (Home) and resource-rich (Foreign) economies display productivity differences but stable income shares due to terms-of-trade dynamics. We show that Home's income share is positively related to the national tax on domestic resource use, a prediction confirmed by dynamic panel estimations for sixteen oil-poor economies. National governments have incentives to deviate from both efficient and laissez-faire allocations. In Home, increasing the oil tax improves welfare through a rent-transfer mechanism. In Foreign, subsidies (taxes) on domestic oil use improve welfare if R&D productivity is lower (higher) than in Home.

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Bibliographic Info

Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 10/132.

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Length: 42 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:eth:wpswif:10-132

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Keywords: Endogenous Growth; Exhaustible Resources; International Trade;

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References

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  1. Edward Barbier, 1999. "Endogenous Growth and Natural Resource Scarcity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 14(1), pages 51-74, July.
  2. Pietro F. Peretto & Simone Valente, 2010. "Resource Wealth, Innovation and Growth in the Global Economy," CER-ETH Economics working paper series 10/124, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  3. James Brander & Slobodan Djajic, 1983. "Rent-Extracting Tariffs and the Management of Exhaustible Resources," Canadian Journal of Economics, Canadian Economics Association, vol. 16(2), pages 288-98, May.
  4. Kemp, Murray C & Suzuki, Hideo, 1975. "International Trade with a Wasting but Possibly Replenishable Resource," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 712-32, October.
  5. Daron Acemoglu & Jaume Ventura, 2001. "The World Income Distribution," NBER Working Papers 8083, National Bureau of Economic Research, Inc.
  6. Geldrop, J. van & Withagen, C.A.A.M., 1993. "General equilibrium and international trade with exhaustible resources," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3107034, Tilburg University.
  7. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  8. Julien Daubanes & André Grimaud, 2010. "Taxation of a polluting non-renewable resource in the heterogeneous world," Working Papers 46270, Institut National de la Recherche Agronomique, France.
  9. Lederman, Daniel & Maloney, William F., 2003. "Trade structure and growth," Policy Research Working Paper Series 3025, The World Bank.
  10. 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.
  11. Sanjeev Gupta & Benedict J. Clements & Kevin Fletcher & Gabriela Inchauste, 2002. "Issues in Domestic Petroleum Pricing in Oil-Producing Countries," IMF Working Papers 02/140, International Monetary Fund.
  12. 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.
  13. Christian Scholz & Georg Ziemes, 1999. "Exhaustible Resources, Monopolistic Competition, and Endogenous Growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(2), pages 169-185, March.
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Cited by:
  1. Lucas Bretschger & Simone Valente, 2013. "International Resource Tax Policies Beyond Rent Extraction," CER-ETH Economics working paper series 13/185, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  2. Julien Daubanes & Lisa Leinert, 2012. "Optimum Tariffs and Exhaustible Resources: Theory and Evidence for Gasoline," CER-ETH Economics working paper series 12/163, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  3. Massimiliano Mazzanti & Roberto Zoboli, 2012. "A Political Economy Approach to Resource Taxation: Weak Sustainability, Revenue Recycling and Regional Planning," Working Papers 201202, University of Ferrara, Department of Economics.
  4. Lucas Bretschger & Simone Valente, 2011. "International economics and natural resources: from theory to policy," International Economics and Economic Policy, Springer, vol. 8(2), pages 115-120, June.

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