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International Resource Tax Policies Beyond Rent Extraction

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  • Simone Valente

    (Department of Economics, Norwegian University of Science and Technology)

  • Luca Bretschger

    (Center of Economic Research, ETH Zürich)

Abstract

We study the incentives of selfish governments to tax tradable primary inputs under asymmetric trade. Using an empirically-consistent model of endogenous growth, we obtain explicit links between persistent gaps in productivity growth and the observed tendency of resource-exporting (importing) countries to subsidize (tax) domestic resource use. Assuming uncoordinated maximization of domestic welfare, national governments wish to deviate (i) from inefficient laissez-faire equilibria as well as (ii) from efficient equilibria in which domestic distortions are internalized. The incentive of resource-rich countries to subsidize hinges on slower productivity growth and is disconnected from the typical incentive of importers to tax resource inflows i.e., rent extraction. The model predictions concerning the impact of resource taxes on relative income shares are supported by empirical evidence.

Suggested Citation

  • Simone Valente & Luca Bretschger, 2013. "International Resource Tax Policies Beyond Rent Extraction," Working Paper Series 15313, Department of Economics, Norwegian University of Science and Technology.
    • Handle: RePEc:nst:samfok:15313
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    References listed on IDEAS

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    Cited by:

    1. Bretschger, Lucas & Valente, Simone, 2018. "Productivity Gaps And Tax Policies Under Asymmetric Trade," Macroeconomic Dynamics, Cambridge University Press, vol. 22(6), pages 1391-1427, September.

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    More about this item

    Keywords

    Productivity Growth; Exhaustible Resources; International Trade.;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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