On the Optimal Taxation of an Exhaustible Resource Under Monopolistic Extraction

J. Daubanes

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    Abstract

    In a simple model of resource depletion (isoelastic demand and constant unit extraction cost), we fully characterize the set of linear effiency-inducing tax/subsidy schemes. We show that this set is infinite and all the larger as the cost of extraction is low. Depending on the magnitude of the latter, we show that there may exist optimal linear strict taxes, thus allowing the regulator to induce efficiency without subsidizing the mine industry at any date. We illustrate and argue that the exhaustibility constraint the monopolist extractor faces can be exploited by the regulator to relax the standard trade-off between inducing efficiency and raising revenues from the monopoly.
    Original languageEnglish
    Place of PublicationTilburg
    PublisherVakgroep CentER
    Number of pages15
    Volume2007-34
    Publication statusPublished - 2007

    Publication series

    NameCentER Discussion Paper
    Volume2007-34

    Keywords

    • Exhaustible resources
    • Imperfect competition
    • Optimal taxation

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