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Rent-Extracting Tariffs and the Management of Exhaustible Resources

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  • James Brander
  • Slobodan Djajic

Abstract

The paper examines the interaction between a resource-exporting and a resource-importing country. The exporter chooses an optimal depletion rate and decides the allocation of the extracted resource between exports and domestic use. Optimal management from a national view entails inefficiency from a global perspective because too little resource is exported since the supplying country exploits its monopoly power. The importing country, however, has incentive to extract some of the resource rent with a tariff. The optimal tariff induces greater overall inefficiency.

Suggested Citation

  • James Brander & Slobodan Djajic, 1982. "Rent-Extracting Tariffs and the Management of Exhaustible Resources," Working Papers 468, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:468
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