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Endogenous Growth, Asymmetric Trade and Resource Taxation

Since 1980, the aggregate income of oil-exporting countries relative to that of oil- poor countries has been remarkably constant despite structural gaps in productivity growth rates. This stylized fact is analyzed in a two-country model where resource- poor (Home) and resource-rich (Foreign) economies display productivity differences but stable income shares due to terms-of-trade dynamics. We show that Home's income share is positively related to the national tax on domestic resource use, a prediction confirmed by dynamic panel estimations for sixteen oil-poor economies. National governments have incentives to deviate from both efficient and laissez-faire allocations. In Home, increasing the oil tax improves welfare through a rent-transfer mechanism. In Foreign, subsidies (taxes) on domestic oil use improve welfare if R&D productivity is lower (higher) than in Home.

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File URL: http://www.cer.ethz.ch/research/WP-10-132.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 10/132.

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Length: 42 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:eth:wpswif:10-132
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  1. Grimaud, André, 2009. "Taxation of a Polluting Non-Renewable Resource in the Heterogeneous World," IDEI Working Papers 541, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. James Brander & Slobodan Djajic, 1982. "Rent-Extracting Tariffs and the Management of Exhaustible Resources," Working Papers 468, Queen's University, Department of Economics.
  3. van Geldrop, Jan H. & Withagen, Cees A. A. M., 1993. "General equilibrium and international trade with exhaustible resources," Journal of International Economics, Elsevier, vol. 34(3-4), pages 341-357, May.
  4. 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.
  5. Sanjeev Gupta & Benedict J. Clements & Kevin Fletcher & Gabriela Inchauste, 2002. "Issues in Domestic Petroleum Pricing in Oil-Producing Countries," IMF Working Papers 02/140, International Monetary Fund.
  6. Acemoglu, Daron & Ventura, Jaume, 2001. "The World Income Distribution," CEPR Discussion Papers 2973, C.E.P.R. Discussion Papers.
  7. Christian Scholz & Georg Ziemes, 1999. "Exhaustible Resources, Monopolistic Competition, and Endogenous Growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(2), pages 169-185, March.
  8. Pietro F. Peretto & Simone Valente, 2010. "Resource Wealth, Innovation and Growth in the Global Economy," CER-ETH Economics working paper series 10/124, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  9. Edward Barbier, 1999. "Endogenous Growth and Natural Resource Scarcity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 14(1), pages 51-74, July.
  10. Lederman, Daniel & Maloney, William F., 2003. "Trade structure and growth," Policy Research Working Paper Series 3025, The World Bank.
  11. Kemp, Murray C & Suzuki, Hideo, 1975. "International Trade with a Wasting but Possibly Replenishable Resource," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 712-32, October.
  12. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
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