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Optimal taxation of a monopolistic extractor: Are subsidies necessary?

Julien Daubanes ()

Energy Economics, 2011, vol. 33, issue 3, 399-403

Abstract: This note reconsiders the optimal taxation problem when extraction of an exhaustible resource is monopolistic. In a standard model, I explicitly characterize and examine all the efficiency-inducing paths of taxes/subsidies on the resource. Consistently with the literature, there is a family of such optimal paths. In contrast with Im (2002), it may not be necessary to subsidize the monopoly at any date: within the family of optimal paths of taxes/subsidies, there may exist some paths along which the regulator raises positive revenues at all dates. This illustrates how the static trade-off between inducing efficiency and raising tax revenues in the presence of market power is relaxed under exhaustibility.

Keywords: Exhaustible; resources; Optimal; taxation; Imperfect; competition (search for similar items in EconPapers)
Date: 2011
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Working Paper: Optimal taxation of a monopolistic extractor: are subsidies necessary? (2008) Downloads
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