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Optimal taxation of a monopolistic extractor: are subsidies necessary?

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Abstract

In a standard partial equilibrium model of resource depletion, this paper charac- terizes and examines the solution to the optimal taxation problem when extraction is monopolistic. The main result is that the family of subgame perfect effciency- inducing tax/subsidy schemes may include some strict tax policies. This illustrates how the static trade-off between inducing effciency and raising tax revenues in the presence of market power is relaxed under exhaustibility.

Suggested Citation

  • Julien Daubanes, 2008. "Optimal taxation of a monopolistic extractor: are subsidies necessary?," CER-ETH Economics working paper series 08/92, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:08-92
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    4. Leonard Leung & Glenn Jenkins, 2013. "An Economic Evaluation of Peru's LNG Export Policy," Development Discussion Papers 2013-03, JDI Executive Programs.
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    More about this item

    Keywords

    Exhaustible resources; Imperfect competition; Optimal taxation;
    All these keywords.

    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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