Optimum Commodity Taxation with a Non-Renewable Resource

42 Pages Posted: 9 Apr 2015

See all articles by Julien Daubanes

Julien Daubanes

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Pierre Lasserre

University of Quebec at Montreal (UQAM) - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO); University of Angers - Research Group in Quantitative Saving (GREQAM)

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Date Written: March 31, 2015

Abstract

Under standard assumptions, optimum commodity taxation (OCT) should target non-renewable resources (NRRs) in priority. NRRs should be taxed at a higher rate than otherwise-identical conventional commodities. NRR substitutes and complements should receive a particular tax treatment. When reserves are endogenous, OCT for NRRs distorts both developed reserves, which are reduced, and their depletion, which is slowed down. Reserves are a form of capital and royalties tax its income: our results contradict Chamley’s conclusion that capital should not be taxed in the long run. In a NRR-importing economy, Ramsey taxes are further increased because they allow the capture of foreign rents.

Keywords: optimum commodity taxation, inverse elasticity rule, non-renewable resources, Hotelling resource, supply elasticity, demand elasticity, capital income taxation

JEL Classification: Q310, Q380, H210

Suggested Citation

Daubanes, Julien and Lasserre, Pierre, Optimum Commodity Taxation with a Non-Renewable Resource (March 31, 2015). CESifo Working Paper Series No. 5270, Available at SSRN: https://ssrn.com/abstract=2592355 or http://dx.doi.org/10.2139/ssrn.2592355

Julien Daubanes (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

HOME PAGE: http://www.cer.ethz.ch/resec/people/juliend

Pierre Lasserre

University of Quebec at Montreal (UQAM) - Department of Economics

Center for Interuniversity Research and Analysis on Organization (CIRANO)

University of Angers - Research Group in Quantitative Saving (GREQAM)

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