Second-Best Optimal Taxation of Oil and Capital in a Small Open Economy
AbstractThis paper analyzes the efficient taxation of oil and capital income in an oil-dependent infinite-lived economy facing perfect capital mobility. Two cases are examined: one with product market imperfections and free tax choice, one with perfect competition and tax restrictions. The optimal tax rates on oil and capital strictly depend on the international tax system implemented; however, they are also affected by the degree of market power and the extent to which monopoly profits are taxed, the type of tax restrictions and the use of oil (as an input or a consumer good). Under the residence-based system, capital income should always be exempted from taxation, while the optimal tax on productive oil may differ from zero. Under the source-based system, second-best taxes on capital and oil are non-zero.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2010.20.
Date of creation: Feb 2010
Date of revision:
Optimal Factor Taxation; Oil; Capital Income; Residence-based System; Source-Based System;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-03-06 (Accounting & Auditing)
- NEP-ALL-2010-03-06 (All new papers)
- NEP-ENE-2010-03-06 (Energy Economics)
- NEP-PUB-2010-03-06 (Public Finance)
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.:
- Svensson, Lars E O, 1984. "Oil Prices, Welfare, and the Trade Balance," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 649-72, November.
- Julio J. Rotemberg & Michael Woodford, 1996.
"Imperfect Competition and the Effects of Energy Price Increases on Economic Activity,"
NBER Working Papers
5634, National Bureau of Economic Research, Inc.
- Rotemberg, Julio J & Woodford, Michael, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 550-77, November.
- Joseph E. Stiglitz & Partha Dasgupta, 1970.
"Differential Taxation, Public Goods, and Economic Efficiency,"
Cowles Foundation Discussion Papers
299, Cowles Foundation for Research in Economics, Yale University.
- Stiglitz, Joseph E & Dasgupta, P, 1971. "Differential Taxation, Public Goods and Economic Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 151-74, April.
- Munk, Knud Jorgen, 1980. "Optimal Taxation with Some Non-Taxable Commodities," Review of Economic Studies, Wiley Blackwell, vol. 47(4), pages 755-65, July.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1982.
"Optimal Fiscal and Monetary Policy in an Economy Without Capital,"
532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
- Julio I. Rotemberg & Michael Woodford, 1994.
"Energy Taxes and Aggregate Economic Activity,"
in: Tax Policy and the Economy, Volume 8, pages 159-195
National Bureau of Economic Research, Inc.
- Larry E. Jones & Rodolfo E. Manuelli & Peter E. Rossi, 1993.
"On the Optimal Taxation of Capital Income,"
NBER Working Papers
4525, National Bureau of Economic Research, Inc.
- Bovenberg, A. Lans & Goulder, Lawrence H., 2002.
"Environmental taxation and regulation,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 23, pages 1471-1545
- Newbery, D., 2005. "Why Tax Energy? Towards a More Rational Energy Policy," Cambridge Working Papers in Economics 0508, Faculty of Economics, University of Cambridge.
- Jang-Ting Guo & Kevin J. Lansing, 1998.
"Optimal taxation of capital income with imperfectly competitive product markets,"
Working Papers in Applied Economic Theory
98-04, Federal Reserve Bank of San Francisco.
- Guo, Jang-Ting & Lansing, Kevin J., 1999. "Optimal taxation of capital income with imperfectly competitive product markets," Journal of Economic Dynamics and Control, Elsevier, vol. 23(7), pages 967-995, June.
- Kenneth L. Judd, 2002. "Capital-Income Taxation with Imperfect Competition," American Economic Review, American Economic Association, vol. 92(2), pages 417-421, May.
- David M. Newbery, 2005. "Why Tax Energy? Towards a More Rational Policy," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-40.
- DAUBANES, Julien & LASSERRE, Pierre, 2011.
"Optimum Commodity Taxation with a Non-Renewable Resource,"
Cahiers de recherche
03-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Julien Daubanes & Pierre Lasserre, 2012. "Optimum Commodity Taxation with a Non-Renewable Resource," CIRANO Working Papers 2012s-04, CIRANO.
- Julien Daubanes & Pierre Lasserre, 2011. "Optimum Commodity Taxation with a Non-Renewable Resource," CER-ETH Economics working paper series 11/151, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Julien Daubanes & Pierre Lasserre, 2011. "Optimum Commodity Taxation with a Non-Renewable Resource," CIRANO Working Papers 2011s-05, CIRANO.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah).
If references are entirely missing, you can add them using this form.