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The Taxation of Exhaustible Resources

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  • Partha Dasgupta
  • Geoffrey Heal
  • Joseph E. Stiflitx

Abstract

This paper analyzes the effect of taxation on the intertemporal allocation of an exhaustible resource. A general framework within which a large variety of taxes can be analyzed is developed and then applied to a number of specific taxes. It is shown that there exists a pattern of taxation which can generate essentially any desired pattern of resource usage. Many tax policies, however, have effects which are markedly different both from the effects that these policies would have in the case of produced commodities-and from those which they are designed (or widely thought) to have. For instance, if extraction costs are zero, a depletion allowance at a constant rate (widely thought to encourage the extraction of resources) has absolutely no effect; its gradual removal (usually thought to be preferable to a sudden removal) leads to faster rates of depletion (and lower prices) now, but higher prices in the future; which its sudden and unanticipated removal has absolutely no distortionary effect on the pattern of extraction. More generally, it is shown that the effects of tax structure on the patterns of extraction are critically dependent on expectations concerning future taxation. (The changes in tax structure which have occurred in the past fifty years are of the kind that, if they were anticipated, (or if similar further changes are expected to occur in the future) lead to excessively fast exploitation of natural resources. However, if it is believed that current tax policies (including rates) will persist indefinitely, the current tax structure would lead to excessive conservationism. Thus, whether in fact current tax policies have lead to excessive conservationism is a moot question.

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File URL: http://www.nber.org/papers/w0436.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0436.

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Date of creation: Jan 1980
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Publication status: published as Dasgupta, P.; Heal, G. M.; and Stiglitz, J. E. "The Taxation of Exhaustible Resources." Public Policy and the Tax System, edited by G. A. Hughes and G . M. Heal, pp. 150-172. London: George Allen & Unwin, 1980.
Handle: RePEc:nbr:nberwo:0436

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References

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  1. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, American Economic Association, vol. 64(2), pages 1-14, May.
  2. Heal, G., 1990. "The Optimal Use Of Exhaustible Resources," Papers fb-_90-10, Columbia - Graduate School of Business.
  3. Joseph E. Stiglitz, 1968. "The Effects of Income, Wealth, and Capital Gains Taxation on Risk Taking," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 248, Cowles Foundation for Research in Economics, Yale University.
  4. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, American Economic Association, vol. 66(4), pages 655-61, September.
  5. Dasgupta,P. S. & Heal,G. M., 1985. "Economic Theory and Exhaustible Resources," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521297615.
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Cited by:
  1. Grimaud, André & Rougé, Luc, 2012. "Carbon Sequestration, Economic Policies and Growth," TSE Working Papers, Toulouse School of Economics (TSE) 12-349, Toulouse School of Economics (TSE), revised Aug 2013.
  2. Julien Daubanes & Pierre Lasserre, 2011. "Optimum Commodity Taxation with a Non-Renewable Resource," CIRANO Working Papers, CIRANO 2011s-05, CIRANO.
  3. A. M. Hughey, 1991. "Joint Natural Resources and Government Policy: Helium and Natural Gas," Eastern Economic Journal, Eastern Economic Association, vol. 17(1), pages 80-88, Jan-Mar.
  4. Chichilnisky, Graciela, 1990. "Global models and North-South relations," MPRA Paper 8126, University Library of Munich, Germany.
  5. Thomas Sterner & Jeroen van den Bergh, 1998. "Frontiers of Environmental and Resource Economics," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 11(3), pages 243-260, April.
  6. Chichilnisky, Graciela & Beltratti, Andrea & Heal, Geoffrey, 1998. "Sustainable use of renewable resources, Chapter 2.1," MPRA Paper 8815, University Library of Munich, Germany.
  7. Chichilnisky, Graciela, 1990. "Large and small models: their suitability for North-South issues," MPRA Paper 8354, University Library of Munich, Germany.
  8. Andrea Beltratti & Graciela Chichilnisky & Geoffrey Heal, 1993. "Sustainable Growth and the Green Golden Rule," NBER Working Papers 4430, National Bureau of Economic Research, Inc.
  9. Chichilnisky, Graciela & Beltratti, Andrea & Heal, Geoffrey, 1994. "The environment and the long run: A comparison of different criteria," MPRA Paper 7907, University Library of Munich, Germany.

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