Second-Best Optimal Taxation of Oil and Capital in a Small Open Economy
This paper analyzes the efficient taxation of oil and capital income in an oil-dependent infinite-lived economy facing perfect capital mobility. Two cases are examined: one with product market imperfections and free tax choice, one with perfect competition and tax restrictions. The optimal tax rates on oil and capital strictly depend on the international tax system implemented; however, they are also affected by the degree of market power and the extent to which monopoly profits are taxed, the type of tax restrictions and the use of oil (as an input or a consumer good). Under the residence-based system, capital income should always be exempted from taxation, while the optimal tax on productive oil may differ from zero. Under the source-based system, second-best taxes on capital and oil are non-zero.
|Date of creation:||Feb 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.feem.it/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- A. Lans Bovenberg & Lawrence H. Goulder, 2001.
"Environmental Taxation and Regulation,"
NBER Working Papers
8458, National Bureau of Economic Research, Inc.
- Joseph E. Stiglitz & Partha Dasgupta, 1970.
"Differential Taxation, Public Goods, and Economic Efficiency,"
Cowles Foundation Discussion Papers
299, Cowles Foundation for Research in Economics, Yale University.
- Stiglitz, Joseph E & Dasgupta, P, 1971. "Differential Taxation, Public Goods and Economic Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 151-74, April.
- Kenneth L. Judd, 2002. "Capital-Income Taxation with Imperfect Competition," American Economic Review, American Economic Association, vol. 92(2), pages 417-421, May.
- Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
- Jones, Larry E. & Manuelli, Rodolfo E. & Rossi, Peter E., 1997.
"On the Optimal Taxation of Capital Income,"
Journal of Economic Theory,
Elsevier, vol. 73(1), pages 93-117, March.
- Julio J. Rotemberg & Michael Woodford, 1996.
"Imperfect Competition and the Effects of Energy Price Increases on Economic Activity,"
NBER Working Papers
5634, National Bureau of Economic Research, Inc.
- Rotemberg, Julio J & Woodford, Michael, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 550-77, November.
- Newbery, D., 2005. "Why Tax Energy? Towards a More Rational Energy Policy," Cambridge Working Papers in Economics 0508, Faculty of Economics, University of Cambridge.
- Jang-Ting Guo & Kevin J. Lansing, 1998.
"Optimal taxation of capital income with imperfectly competitive product markets,"
Working Papers in Applied Economic Theory
98-04, Federal Reserve Bank of San Francisco.
- Guo, Jang-Ting & Lansing, Kevin J., 1999. "Optimal taxation of capital income with imperfectly competitive product markets," Journal of Economic Dynamics and Control, Elsevier, vol. 23(7), pages 967-995, June.
- Lucas, Robert Jr. & Stokey, Nancy L., 1983.
"Optimal fiscal and monetary policy in an economy without capital,"
Journal of Monetary Economics,
Elsevier, vol. 12(1), pages 55-93.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Julio J. Rotemberg & Michael Woodford, 1993.
"Energy Taxes and Aggregate Economic Activity,"
NBER Working Papers
4576, National Bureau of Economic Research, Inc.
- Judd, Kenneth L., 1999. "Optimal taxation and spending in general competitive growth models," Journal of Public Economics, Elsevier, vol. 71(1), pages 1-26, January.
- David M. Newbery, 2005. "Why Tax Energy? Towards a More Rational Policy," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-40.
- Munk, Knud Jorgen, 1980. "Optimal Taxation with Some Non-Taxable Commodities," Review of Economic Studies, Wiley Blackwell, vol. 47(4), pages 755-65, July.
- Svensson, Lars E O, 1984. "Oil Prices, Welfare, and the Trade Balance," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 649-72, November.
When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2010.20. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah)
If references are entirely missing, you can add them using this form.