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Optimal taxation of a monopolistic extractor: are subsidies necessary?

In a standard partial equilibrium model of resource depletion, this paper charac- terizes and examines the solution to the optimal taxation problem when extraction is monopolistic. The main result is that the family of subgame perfect effciency- inducing tax/subsidy schemes may include some strict tax policies. This illustrates how the static trade-off between inducing effciency and raising tax revenues in the presence of market power is relaxed under exhaustibility.

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File URL: http://www.cer.ethz.ch/research/wp_08_92.pdf
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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 08/92.

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Length: 18 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:eth:wpswif:08-92
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  1. Benchekroun, Hassan & Van Long, Ngo, 2002. "On the multiplicity of efficiency-inducing tax rules," Economics Letters, Elsevier, vol. 76(3), pages 331-336, August.
  2. Gaudet, Gérard & Lasserre, Pierre, 1990. "Dynamiques comparées des effets de la taxation minière," L'Actualité Economique, Société Canadienne de Science Economique, vol. 66(4), pages 467-497, décembre.
  3. Bergstrom, Theodore C. & Cross, John G. & Porter, Richard C., 1981. "Efficiency-inducing taxation for a monopolistically supplied depletable resource," Journal of Public Economics, Elsevier, vol. 15(1), pages 23-32, February.
  4. Lewis, Tracy & Matthews, Steven A. & Burness, H. Stuart., . "Monopoly and the Rate of Extraction of Exhaustible Resources: Notes," Working Papers 137, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Karp, Larry & Livernois, John, 1992. "On efficiency-inducing taxation for a non-renewable resource monopolist," Journal of Public Economics, Elsevier, vol. 49(2), pages 219-239, November.
  6. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
  7. Tullock, Gordon, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 231-33, March.
  8. Hassan Benchekroun & Ngo Van Long, 2008. "A Class Of Performance-Based Subsidy Rules," The Japanese Economic Review, Japanese Economic Association, vol. 59(4), pages 381-400.
  9. Julien Daubanes & André Grimaud, 2010. "Taxation of a Polluting Non-renewable Resource in the Heterogeneous World," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(4), pages 567-588, December.
  10. Yucel, Mine Kuban, 1989. "Severance taxes and market structure in an exhaustible resource industry," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 134-148, March.
  11. Benchekroun, Hassan & van Long, Ngo, 1998. "Efficiency inducing taxation for polluting oligopolists," Journal of Public Economics, Elsevier, vol. 70(2), pages 325-342, November.
  12. DAUBANES Julien & GRIMAUD André, 2006. "On the North-South Effects of Environmental Policy: Rent Transfers, Relocation and Growth," LERNA Working Papers 06.26.219, LERNA, University of Toulouse.
  13. Gaudet, Gerard & Lasserre, Pierre, 1988. "On comparing monopoly and competition in exhaustible resource exploitation," Journal of Environmental Economics and Management, Elsevier, vol. 15(4), pages 412-418, December.
  14. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-61, September.
  15. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
  16. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
  17. Gamponia, Villamor & Mendelsohn, Robert, 1985. "The Taxation of Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 165-81, February.
  18. Im, Jeong-Bin, 2002. "Optimal taxation of exhaustible resource under monopoly," Energy Economics, Elsevier, vol. 24(3), pages 183-197, May.
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