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Dynamic Taxation of Non-renewable Natural Resources Under Asymmetric Information About Reserves

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  • Petter Osmundsen

Abstract

Optimal regulation is developed for a case with type-dependent dynamics in costs. In exploiting nonrenewable natural resources, a government faces the problem that extraction companies possess private information about the size of the reserves. Optimal contracts, in a two-period framework, distort both the extent and the pace of depletion. The regulatory optimum is implementable by a menu of tangent planes, generated by license fees and royalties, or by a corporate income tax system containing type-dependent depletion allowances and tax-exempted income levels. If the terminal time is endogenized, it is optimal also to distort the number of extraction periods.

Suggested Citation

  • Petter Osmundsen, 1998. "Dynamic Taxation of Non-renewable Natural Resources Under Asymmetric Information About Reserves," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 933-951, November.
    • Handle: RePEc:cje:issued:v:31:y:1998:i:4:p:933-951
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    Citations

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    Cited by:

    1. Julie Ing, 2016. "Adverse selection, commitment and exhaustible resource taxation," CER-ETH Economics working paper series 16/263, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    2. Eduardo Engel & Ronald Fischer, 2008. "Optimal Resource Extraction Contracts under Threat of Expropriation," Levine's Bibliography 122247000000001833, UCLA Department of Economics.
    3. David Martimort & Jérôme Pouyet & Francesco Ricci, 2018. "Extracting information or resource? The Hotelling rule revisited under asymmetric information," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 311-347, June.
    4. Osmundsen, Petter, 2002. "Regulation of common property resources under private information about resource externalities," Resource and Energy Economics, Elsevier, vol. 24(4), pages 349-366, November.
    5. Jean-Christophe Poudou & Lionel Thomas, 2000. "Concession minière et asymétrie d'information," Économie et Prévision, Programme National Persée, vol. 143(2), pages 129-138.
    6. Ing, Julie, 2020. "Adverse selection, commitment and exhaustible resource taxation," Resource and Energy Economics, Elsevier, vol. 61(C).
    7. Julie Ing, 2012. "The impact of commitment on nonrenewable resources management with asymmetric information on costs," Working Papers 1205, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    8. Patrick Gonzalez, 2013. "Taxing a Natural Resource with a Minimum Revenue Requirement," Cahiers de recherche CREATE 2013-6, CREATE.
    9. Hung, Nguyen Manh & Poudou, Jean-Christophe & Thomas, Lionel, 2006. "Optimal resource extraction contract with adverse selection," Resources Policy, Elsevier, vol. 31(2), pages 78-85, June.
    10. François Castonguay & Pierre Lasserre, 2016. "Resource Agency Relationship with Privately Known Exploration and Extraction Costs," CIRANO Working Papers 2016s-56, CIRANO.
    11. David Martimort & Jerome Pouyet & Francesco Ricci, 2018. "Contracts for the Management of a Non-Renewable Resource under Asymmetric Information and Structural Price Breaks," Annals of Economics and Statistics, GENES, issue 132, pages 81-103.
    12. Mireille Chiroleu-Assouline & Sebastien Roussel, 2014. "Payments for Carbon Sequestration in Agricultural Soils: Incentives for the Future and Rewards for the Past," CEEES Paper Series CE3S-01/14, European University at St. Petersburg, Department of Economics.
    13. Osmundsen, Petter & Roll, Kristin Helen & Tveteras, Ragnar, 2012. "Drilling speed—the relevance of experience," Energy Economics, Elsevier, vol. 34(3), pages 786-794.
    14. Beer, Sebastian & Loeprick, Jan, 2017. "Taxing income in the oil and gas sector — Challenges of international and domestic profit shifting," Energy Economics, Elsevier, vol. 61(C), pages 186-198.
    15. Osmundsen, Petter & Roll, Kristin Helen & Tveterås, Ragnar, 2010. "Faster Drilling with Expercience?," UiS Working Papers in Economics and Finance 2010/7, University of Stavanger.
    16. Osmundsen, Petter, 2009. "Time consistency in Petroleum Taxation - The case of Norway," UiS Working Papers in Economics and Finance 2009/18, University of Stavanger.
    17. Petter Osmundsen, Magne Emhjellen, Thore Johnsen, Alexander Kemp and Christian Riis, 2015. "Petroleum Taxation Contingent on Counter-Factual Investment Behaviour," The Energy Journal, International Association for Energy Economics, vol. 0(Adelman S).
    18. Robin Boadway & Michael Keen, 2009. "Theoretical Perspectives On Resource Tax Design," Working Paper 1206, Economics Department, Queen's University.
    19. Rahman, Shaikh Mahfuzur & Helal, Uddin, 2004. "Optimal Contracts For Exploration With Cost Recovery Of An Exhaustible Natural Resource Under Asymmetric Information," 2004 Annual meeting, August 1-4, Denver, CO 20180, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Smith, James L., 2013. "Issues in extractive resource taxation: A review of research methods and models," Resources Policy, Elsevier, vol. 38(3), pages 320-331.
    21. Helal, Uddin & Rahman, Shaikh Mahfuzur, 2006. "Optimal Contracts for Exploration with Cost Recovery of an Exhaustible Natural Resource Under Asymmetric Information," Working Papers 28578, University of Maryland, Department of Agricultural and Resource Economics.
    22. Hung, N.-M & Poudou, J.-C. & Thomas, L., 2003. "Mining and Incentive Concession Contracts," Cahiers du CREDEN (CREDEN Working Papers) 03.10.38, CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1.
    23. Lappi, Pauli, 2020. "On optimal extraction under asymmetric information over reclamation costs," Journal of Economic Dynamics and Control, Elsevier, vol. 119(C).
    24. Julie Ing, 2012. "The impact of commitment on nonrenewable resources management with asymmetric information on costs," Working Papers halshs-00690896, HAL.

    More about this item

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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