Jurisdictional Tax Competition and the Division of Nonrenewable Resource Rents

This paper presents a model of nonrenewable resource extraction across multiple jurisdictions which engage in strategic tax competition. The model incorporates rents due to both resource scarcity and capital scarcity as well as intra-region Ricardian rents. Regions set taxes on nonrenewable resource production strategically to balance tax revenues and local benefits from investment conditional on other regions’ tax rates. A representative extraction firm then allocates production capital across regions and time to maximize the present value of profits. Generally, we find that the division of resource rent between firms and regional governments ultimately depends on the relative scarcity of natural and production capital, relative costs across space, and the value regional governments place on economic activity. This theoretical result provides policymakers with information on the determinants of optimal tax rates and motivates future empirical research on the factors influencing the division of resource rent in practice.     

Natural resources, capital accumulation and the resource curse

Early concern by economists for the effect of natural capital on economic growth gave way to complacency and neglect during the nineteenth century. Evidence has emerged, however, that since the 1960s the economic performance of low-income countries has been inversely related to their natural resource wealth. This relationship is not a deterministic one so policy counts. SEEA can help improve the policy and performance of resource-abundant low-income countries by reinforcing the rationale for the sound management of natural resources and also by providing an index of policy sustainability in the form of the net saving rate. This policy index, along with other measures such as a capital fund for sterilizing the rent, initiatives to increase the transparency of rent flows and the rigorous evaluation of alternative uses of additional public sector revenue can improve the efficiency by which natural resource rent is transformed into alternative forms of capital to sustain rising social welfare. Chad and Mauritania provide case studies to illustrate how SEEA and net saving can be used to diagnose policy failure and improve economic performance.     

PROJECT EVALUATION AND RESOURCE SUSTAINABILITY

This paper outlines a procedure for embodying the principle of resource sustainability in evaluating projects that use significant amounts of natural resources. In this analysis, sustainability requires maintaining the productivity of the resource used over time, either by renewing the resource or by investing its depletion in other capital assets. The basis of a project's evaluation is its net present social value (NPSV), including resource depletion as a social cost. The social cost of depletion is the amount that must be saved and reinvested annually to accumulate a fund that will yield a perpetual annual income equal to the net output lost by resource depletion. By treating resource depletion as a social cost in calculating NPSV, projects causing a high rate of resource depletion receive a relatively low valuation compared with projects causing less resource depletion. Resource depletion includes environmental damage caused by constructing and operating a project, as well as the direct consumption of natural resources.
Several problems arise in reinvesting depletion to preserve the value of a resource base. One major problem relates to the substitutability of man-made capital for natural resources. The conclusion of the analysis here is that society must invest a substantial amount of resource depletion in: (i) replenishing renewable resources, (ii) increasing product output per unit of resource used, or (Hi) increasing the end-use efficiency of resource-intensive products.     

The Neutrality of the Resource Rent Tax

Although less distorting than conventional royalties and income tax, the resource rent tax is strictly neutral only if the interest rate at which losses are carried forward relates correctly to the discount rate employed by investors in project evaluation. Thus it is possible in principle to design a resource rent tax that is strictly neutral only if parameters are set independently for each minerals investment. Such attempts to tailor parameters to each investment would make great demands on information and would increase business uncertainty. The paper suggests expedients to reduce the costs of non-neutrality when resource rent tax is applied with parameters that are of general application and discusses their use in Australia.     

使用者成本与我国非再生能源资源的定价改革

本文从使用者成本的内涵及其表现形式出发,通过分析我国非再生能源资源税费制度的现状以及存在的问题,表明非再生能源资源定价中使用者成本的缺失。提出以明晰产权、合理征收矿山地租、完善矿业权交易市场和形成竞争性市场价格的途径,实现非再生能源资源定价中使用者成本的充分补偿。     

使用者成本视角下的能源矿产资源定价改革

本文从使用者成本的内涵及其表现形式出发,通过分析我国能源矿产资源税费制度的现状以及存在的问题,得出了能源矿产资源产品定价中使用者成本缺失的初步结论,由此提出以明晰产权、合理征收矿山地租、完善矿业权交易市场和形成竞争性市场价格为途径,实现资源产品定价中使用者成本的充分补偿.     

Taxes versus quotas in lobbying by a polluting industry with private information on abatement costs

We present a model of lobbying by a polluting industry with private information on pollution abatement costs and compare taxes with quotas under such conditions. We also examine the effect of private information on lobbying activity and social welfare under these two instruments. It is found that private information might improve social welfare under taxes when the government has little concern for social welfare, whereas private information does not improve social welfare under quotas. Quotas are generally socially preferred when the slope of marginal abatement costs is steeper than that of marginal damage or when the government does not concern itself with social welfare. However, private information reduces the comparative disadvantage of taxes compared to quotas when the government has little concern for social welfare. Finally, the results of numerical examples suggest that quotas are employed rather than taxes if the difference in natural emission levels between high- and low-cost industries is large.     

Property taxes and dynamic efficiency: A correction

According to Kim and Lee (1997), property taxes as opposed to capital gain taxes and taxes on rent endanger dynamic efficiency. The present paper shows that the choice of the tax base is immaterial. What counts is whether the taxes eliminate the after-tax rent. Empirical evidence suggests that this is not the case.     

Capital and Consumption Tax Reforms in a Small Open Economy

The effects of a reform in capital and consumption taxes on private welfare and government tax revenue are examined for a small open, capital‐importing economy. A trade‐off between private welfare and tax revenue is encountered in maximizing social welfare. Nonetheless, lowering capital taxes and raising consumption taxes can increase both private welfare and tax revenue if the initial tax rates are not optimal. In addition, a tax reform by this fashion is a likely response to a rise in the foreign rate of return on capital.     

Pure rent taxation and allocation of capital in a two-sector open economy: A long-run analysis

In this paper, the long-run incidence of a tax on pure rent is analyzed in an OLG two-sector small open economy, in which one sector produces a capital good and one sector a consumer good. Contrary to what is obtained in a one-sector closed economy, a land rent tax does not necessarily foster nonhumam wealth accumulation and capital formation. The accommodating scheme for the government budget plays a crucial role for the effects of pure rent taxation. A rent tax stimulates nonhuman wealth if distortionary taxes on wealth or on income from nonland inputs are alleviated. The mechanism spurring capital formation is brought into action, instead, only when the rent tax is matched by a fall in capital taxation or, if the capital sector is capital intensive, by an increase in government spending on the capital good.     

Private information,Coasian bargaining,and the second welfare theorem

Most of the debate about Coasian bargaining in the presence of externalities relates to the First Welfare Theorem: is the outcome under bargaining efficient? This debate has involved the definition and importance of transaction costs, the significance of private information, and the effect of entry. There has been little analysis of how Coasian bargaining relates to the Second Welfare Theorem: even if the bargaining outcome is efficient, does the process limit the set of Pareto optimal allocations which can be achieved?We consider a model in which individuals utilize a common resource and may affect each other's output. The individuals differ in their productivities or tastes and this information is private to each of them. The government can manage the common resource and use nonlinear taxes to correct for the externality or it can turn the common resource over to a private owner who can charge individuals to utilize it with a nonlinear fee schedule. The government and the owner have the same information about tastes and productivities of the individuals. Except for the private information, there are no bargaining or administrative costs for collecting the taxes or fees. Whether there is public or private ownership, the government desires to redistribute, but it faces self-selection constraints.We show that the outcome of Coasian bargaining is constrained Pareto efficient. That is, given the information constraints, no Pareto improvement is possible. However, private ownership may limit what Pareto optimal allocations the government can achieve. The private owner in seeking to maximize profits always proposes contracts which counteract the government's attempts to redistribute across individuals with different characteristics. Under public management, any Pareto optimum can be sustained. In this context, private ownership, while not inefficient, does limit the government's ability to redistribute.     

Watershed externalities, shifting cropping patterns and groundwater depletion in Indian semi-arid villages: The effect of alternative water pricing policies

Frequent droughts and groundwater depletion are critical constraints to improving agricultural productivity in the semi-arid tropics. India has been promoting integrated watershed management in drought-prone areas to address these constraints. Watershed communities are being assisted to invest in groundwater re-charging facilities. While communities and the public bear such costs, individual farmers capture irrigation benefits. Groundwater is a free common property resource and land users hold de-facto use rights. This has accelerated private irrigation investments and depletion of aquifers resulting in iniquitous distribution of irrigation water. Power subsidies and negligible pumping costs aggravate the problem. These policy failures and low irrigation costs to farmers are displacing water-efficient crops in favor of water-intensive crops in water-scare areas. The paper reviews the village-level externalities that aggravate groundwater depletion and evaluates potential policy options to enhance local collective action in water management. Using 3SLS, an econometric crop-water productivity model is used to evaluate alternative water policy instruments. The results indicate that different types of water user charges can be introduced with modest consequences on profitability and farm incomes. If properly implemented and managed by the local communities, pro-poor policies could bring considerable sustainability benefits and also ensure enhanced equity in access to the resource.     

产权性质、税收成本与上市公司股利政策

文章研究了上市公司控股股东的税收成本差异对上市公司股利政策的影响。作为股利政策的决策者,控股股东须权衡股利政策的成本和收益,其中税收成本是影响股利政策的重要因素之一。不同性质的控股股东对税收成本的关注程度存在显著差异:由于税利分离程度较高,民营控股股东对现金股利的税收成本更为敏感,尤其是在自然人直接控股的上市公司。研究发现,自然人控股公司最不偏好采用现金股利的分配方式以规避税收成本,而国有控股公司更倾向于发放较高的现金股利。实证结果支持了文章的假说,即不同产权所隐含的税收成本差异是影响上市公司股利政策的重要因素。     

From rent seeking to human capital: a model where resource shocks cause transitions from stagnation to growth

Abstract.  We present a growth model where agents divide time between rent seeking in the form of resource competition and working in a human capital sector. The latter is interpreted as trade or manufacturing. Rent seeking exerts negative externalities on the productivity of human capital. Adding shocks, in the form of fluctuations in the size of the contested resource, the model can replicate a long phase with stagnant incomes and high levels of rent seeking, interrupted by small, failed growth spurts, eventually followed by a permanent transition to a sustained growth path where rent seeking vanishes in the limit. The model also generates a rise and fall of the so-called natural resource curse: before the takeoff, an increase in the size of the contested resource has a positive effect on incomes; shortly after the takeoff, the effect is negative; and on the balanced growth path the growth rate of per capita income is independent of resource shocks.     

Time consuming resource extraction in an overlapping generations economy with capital

For worldwide fisheries production, two major trends emerge for the next decades: a significantly larger role for aquaculture and reduced output due to climate change impacts. While the former leads to an increase in cost, the latter affects natural regeneration. To address both impacts, we investigate the relevance of resource extraction costs for a private property fishery in an intertemporal general equilibrium model with capital accumulation, commodity production and a labor market. We show how the extraction cost parameter—in addition to time preference, technology and natural regeneration—matters for the existence (and stability) of an economically feasible, nontrivial stationary state. Higher extraction costs increase the equilibrium resource stock, while a reduced regeneration rate (e.g. due to climate change) decreases the stock. Moreover, resource extraction overshoots its new equilibrium value after the cost shock while after a regeneration shock extraction levels adjust monotonically towards the new equilibrium.     

How substitutable is natural capital?

One of the recurring themes in the sustainability literature has been the extent to which a loss of natural capital can be made up for in welfare terms by an increase in other forms of capital. This issue was raised early on in the debate on sustainability by Pearce and has never really been resolved. This paper is an empirical attempt to measure the degree of substitutability between different forms of capital. A nested CES production function is used to allow flexibility in the estimated elasticities of substitution. Also, within this specification, natural resources and other inputs are combined in different levels of the function, thus allowing for different levels of substitutability. Institutional and economic indicators are also incorporated in the production function estimated. Results show that the elasticities derived from functions involving land resources were generally around one or greater, implying a fairly high degree of substitutability. Furthermore, changes in trade openness and private sector investment have a statistically significant and direct relationship on the efficiency of production and hence on income generation. No statistically significant relationship between income and any of the institutional indicators was found.      

The incidence of a tax on pure rent in a small open economy

This paper analyzes the effects of a land rent tax on capital formation and foreign investment in a life-cycle small open economy with endogenous labor-leisure choices. The consequences of land taxation critically depend on how the tax proceeds are used by the government. A land tax depresses capital formation, crowds out foreign investment and increases national wealth and consumption when the land tax revenues are distributed as lump-sum payments. If the proceeds from land taxation are used to finance unproductive government expenditure, the land tax will be neutral in its effects on the capital stock, nonhuman wealth and labor. When the tax revenues are used to reduce labor taxes, the land rent tax spurs nonhuman wealth accumulation and ambiguously affects the capital stock and labor.     

Sustainability or Ruin of a Common Resource Economy with Random Jump

We consider a common resource economy in which agents exploit the common resource, and use it to produce goods and consume the goods produced. Also the agents can invest in private and productive capital. The resource extracted from the common resource is non‐renewable and the common pool is under uncertainty in the sense that it could have a sudden increase or decrease in the course of extraction. In this model we shall explore the probability of sustainability or ruin of the economy. We compare and discuss the optimal extraction rules and the probabilities under cooperative and non‐cooperative regimes.     

THE PUZZLING DIVERGENCE OF RENTS AND USER COSTS, 1980–2004

This paper demonstrates that, in the context of U.S. housing data, rents and ex ante user costs diverge markedly—in both growth rates and levels—for extended periods of time, a seeming failure of arbitrage and a puzzle from the perspective of standard capital theory. The tremendous volatility of even appropriately‐smoothed ex ante annual user cost measures implies that such measures are unsuitable for inclusion in official price statistics. The divergence holds not only at the aggregate level, but at the metropolitan‐market level as well, and is robust across different house price and rent measures. But transactions costs matter: the large persistent divergences did not imply the presence of unexploited profit opportunities. In particular, even though detached housing is readily moved between owner and renter markets, and the detached‐unit rental market is surprisingly thick, transactions costs would have prevented risk‐neutral investors from earning expected profits by buying a property to rent out for a year, and would have prevented risk‐neutral homeowners from earning expected profits by selling their homes and becoming renters for a year. Finally, computing implied appreciation as a residual yields a house price forecast with huge errors; but either longer‐horizon or no‐real‐capital‐gains forecasts—which turn out to have similar forecast errors—imply a far less divergent user cost measure which might ultimately be useful for official price statistics. Some conjectures are offered.     

Should mobile capital pay for public infrastructure investment?

The paper contributes to the discussion of fiscal competition with infrastructure goods. We explicitly focus on the costs of providing public infrastructure capital that appear in the public budget as investment. Thus we analyse the problem in a dynamic framework. Public infrastructure is considered as a marginal product complement to private capital. A central result of the model is that the fact that public capital is a complement to private capital, so that an increase in the supply of public capital ceteris paribus improves the marginal productivity of private capital, cannot be used as an argument to support a source tax. The so-called indirect productivity effect on private capital induced by public inputs does not justify the taxation of mobile capital. Rather, the efficiency of a source tax on mobile capital income depends on the question of whether or not the public input generates a factor rent to private capital.