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Finders, Keepers?

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  • Niko Jaakkola
  • Daniel Spiro

Abstract

Natural resource taxation and investment often exhibit cyclical behaviour, associated with shifts in political power. Why do finders get to keep more of their discoveries in some periods than others? This paper shows such cycles result from the inability of governments to commit to future taxes and firms to commit to credibly exiting a country for good. In a cycle, large resource revenues induce a high tax, which lowers exploration investment, and thereby future findings, which in turn leads governments to reduce tax rates again. This paper documents evidence of cyclical behaviour in several countries with both strong and weak institutions, and provides detailed case studies of two Latin American countries. [Working Paper 22421]

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  • Niko Jaakkola & Daniel Spiro, 2016. "Finders, Keepers?," Working Papers id:11118, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:11118
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    More about this item

    Keywords

    Natural resource taxation; government revenue; cyclical behaviour; tax oscillations;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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