Finders, Keepers?

Niko Jaakkola, Daniel Spiro and Arthur A. van Benthem

No 6435, CESifo Working Paper Series from CESifo

Abstract: Natural-resource taxation and investment exhibit cycles in a vast number of countries, driving political turmoil and power shifts. Using a rational-expectations model, we show cycles result from governments’ inability to commit to future taxes and firms’ inability to credibly exit a country indefinitely. A government sets a low initial tax inducing high investments, which in turn prompts it to increase taxes next period. This induces low investment thus low future taxes, and so on. We investigate which factors reinforce cycles and present ways of avoiding them, and document cycles across many countries including detailed case studies of two Latin-American countries.

Keywords: resource taxation; tax cycles; limited commitment; expropriation (search for similar items in EconPapers)
JEL-codes: H25 Q35 Q38 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ene
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Related works:
Journal Article: Finders, keepers? (2019)
Working Paper: Finders, Keepers? (2016)
Working Paper: Finders, Keepers? (2016)
Working Paper: Finders, Keepers? (2016)
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