Modeling the response to exogenous shocks: The capital uplift rate in petroleum taxation

Magnus Berg, Øyvind Bøhren and Erik Vassnes

Energy Economics, 2018, vol. 69, issue C, 442-455

Abstract: We show how a recent drop in the Norwegian capital uplift rate by two percentage points changes optimal field design and reduces field value for shareholders. Although optimal design changes considerably and value drops by 12%, the ability to reoptimize design after the shock is worth only 1.5% of field value. This evidence suggests that large behavioral effects of a shock do not necessarily imply large value effects, making it less important to always account for the taxpayers' response. The valuation error in such cases may be moderate if one instead uses the simplifying and widespread assumption of unresponsive taxpayers.

Keywords: Endogeneity; Responsive; Unresponsive; Tax shock; Exogenous; Petroleum taxation; Uplift (search for similar items in EconPapers)
JEL-codes: G31 H32 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:69:y:2018:i:c:p:442-455

DOI: 10.1016/j.eneco.2017.12.010

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