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What's in a wedge? Misallocation and Taxation in the Oil Industry


  • Radoslaw Stefanski

    () (University of St Andrews; OxCarre)

  • Gerhard Toews

    () (New Economics School; OxCarre)


Resource misallocation explains a large part of cross-country productivity differences. Measuring differences in marginal revenue products of labor and capital across countries and firms allows for a quantification of the extent of this misallocation, but is typically uninformative of its source. We address this problem by using novel, firm-level data from the oil industry. We confirm the existence of sizeable gaps in marginal revenue products across countries and firms relative to the US, but show that these disappear once we account for revenue taxation. Differences in tax policies are thus sufficient to account for cross-country gaps in marginal products.

Suggested Citation

  • Radoslaw Stefanski & Gerhard Toews, 2018. "What's in a wedge? Misallocation and Taxation in the Oil Industry," Discussion Paper Series, School of Economics and Finance 201804, School of Economics and Finance, University of St Andrews.
  • Handle: RePEc:san:wpecon:1804

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    References listed on IDEAS

    1. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    2. repec:clh:resear:v:5:y:2012:i:30 is not listed on IDEAS
    3. James Cust & Torfinn Harding, 2014. "Institutions and the Location of Oil Exploration," OxCarre Working Papers 127, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    4. Johannes Stroebel & Arthur van Benthem, 2013. "Resource Extraction Contracts Under Threat of Expropriation: Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1622-1639, December.
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    Cited by:

    1. Radek Stefanski, 2019. "Boom Goes the Price: Giant Resource Discoveries and Real Exchange Rate Appreciation," 2019 Meeting Papers 101, Society for Economic Dynamics.

    More about this item


    Misallocation; Productivity Differences; Taxation; Oil;

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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