Dynamic Taxation of Non-renewable Natural Resources Under Asymmetric Information About Reserves

Petter Osmundsen

Canadian Journal of Economics, 1998, vol. 31, issue 4, 933-951

Abstract: Optimal regulation is developed for a case with type-dependent dynamics in costs. In exploiting nonrenewable natural resources, a government faces the problem that extraction companies possess private information about the size of the reserves. Optimal contracts, in a two-period framework, distort both the extent and the pace of depletion. The regulatory optimum is implementable by a menu of tangent planes, generated by license fees and royalties, or by a corporate income tax system containing type-dependent depletion allowances and tax-exempted income levels. If the terminal time is endogenized, it is optimal also to distort the number of extraction periods.

JEL-codes: L51 L72 (search for similar items in EconPapers)
Date: 1998
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