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Soft Fiscal Policies for a Polluting Monopolist

Manel Antelo and Maria L. Loureiro

Year: 2009
Volume: Volume 30
Number: Special Issue #2
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI2-8
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Abstract:
This paper examines optimal environmental taxation in an incomplete-information two-period model in which a monopolistic firm produces and pollutes. The firm is privately informed about its costs of production and abatement, and the regulator � which can only infer the firm�s technology after observing the output from the period 1 � has the chance to set environmental taxes in period 1 to correct the firm�s opportunistic behavior. The regulator is aware that the polluter may strategically choose a given level of production (and pollution) in period 1 in order to manipulate the regulator�s beliefs concerning its technology and, consequently, adjusts the tax paid in period 2. We show that if the regulator reduces pollution taxes in the first period below the level under symmetric information, then the clean firm will signal its type by further reducing its output. Having gathered information from the firm with respect to its technology and emissions, the regulator raises pollution taxes in the second period. In the light of the present results, soft fiscal policies based on initial low-taxes, which are later increased, may be used in the presence of asymmetric information to provide incentives for a firm to reveal its true level of emissions and mitigate opportunistic behavior.



Fuel Subsidies, the Oil Market and the World Economy

Nathan S. Balke, Michael Plante, and Mine Yücel

Year: 2015
Volume: Volume 36
Number: Adelman Special Issue
DOI: 10.5547/01956574.36.SI1.nbal
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Abstract:
This paper studies the effects of oil producing countries' fuel subsidies on the oil market and the world economy. We identify 24 oil-producing countries with fuel subsidies with retail fuel prices that are about 34 percent of the world price. We construct a two-country model where one country represents the oil-exporting subsidizers and the second the oil-importing bloc, and calibrate the model to match recent data. We find that the removal of subsidies would reduce the world price of oil by six percent. The removal of subsidies is unambiguously welfare enhancing for the oil-importing countries. Removal of subsidies is welfare improving for the oil-exporting countries as well, in the baseline calibration. However, the optimal subsidy from the point of view of oil exporters is not zero, in general.



Should Developing Countries Establish Petroleum Funds?

Ragnar Torvik

Year: 2018
Volume: Volume 39
Number: Number 4
DOI: 10.5547/01956574.39.4.rtor
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Abstract:
Many natural-resource-abundant countries have established petroleum funds as part of their strategy to manage their resource wealth. This paper examines reasons that such funds may be established, discusses how these funds are organized, and draws some policy lessons. The paper then develops a theory of how petroleum funds may affect the economic and political equilibrium of an economy, and how this depends on the initial institutions. A challenge with petroleum funds is that they may produce economic and political incentives that undermine their potential benefits. An alternative to establishing petroleum funds is to use revenues to invest domestically in sectors such as infrastructure, education, and health. Such investments have the potential to produce a better economic, as well as institutional, development. This is particularly the case if the initial institutions are weak.





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