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International Resource Tax Policies Beyond Rent Extraction

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Abstract

We study the incentives of selfish governments to tax tradable primary inputs un- der 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.

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  • Lucas Bretschger & Simone Valente, 2013. "International Resource Tax Policies Beyond Rent Extraction," CER-ETH Economics working paper series 13/185, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  • Handle: RePEc:eth:wpswif:13-185
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    References listed on IDEAS

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    Cited by:

    1. Lucas Bretschger & Simone Valente, 2016. "Productivity Gaps and Tax Policies Under Asymmetric Trade," CER-ETH Economics working paper series 16/239, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    More about this item

    Keywords

    Productivity Growth; Exhaustible Resources; International Trade.;

    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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