Natural Resource use Conflict: Gold Mining in Tropical Rainforest in Ghana
AbstractGold is frequently mined in rainforests that can provide either gold or forest benefits, but not both. This conflict in resource use occurs in Ghana, a developing country in the tropics where the capital needed for mining is obtained from foreign direct investment (FDI). We use a dynamic model to show that an ad valorem severance tax on gross revenue can be used to internalize environmental opportunity costs. The optimal tax must equal the ratio of marginal benefits from forest use to marginal benefits from gold extraction. Over time, this tax must change at a rate equal to the difference between the discount rate and the rate of change in the price of gold. Empirical results suggest that the 3 percent tax rate currently used in Ghana is too low to fully represent the external cost of extraction (i.e., lost forest benefits).
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Bibliographic InfoPaper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 182.
Length: 37 pages
Date of creation: 28 Oct 2005
Date of revision:
Publication status: Published as Akpalu, Wisdom and Peter J. Parks, 'Natural Resource use Conflict: Gold Mining in Tropical Rainforest in Ghana' in Environment and Development Economics, 2007, pages 55-72.
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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Optimal taxation; Efficiency; Externality; Dynamic analysis; Firm behaviour;
Other versions of this item:
- Akpalu, Wisdom & Parks, Peter J., 2007. "Natural resource use conflict: gold mining in tropical rainforest in Ghana," Environment and Development Economics, Cambridge University Press, vol. 12(01), pages 55-72, February.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-AFR-2005-11-05 (Africa)
- NEP-ALL-2005-11-05 (All new papers)
- NEP-ENV-2005-11-05 (Environmental Economics)
- NEP-PBE-2005-11-05 (Public Economics)
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