Optimal Extractive Taxes Under Demand Uncertainty
The authors develop a two-period duopoly model characterized by demand uncer-Abstract tainty to consider how a state government should tax the extraction of a nonrenewable resource. They demonstrate that if firms are risk averse, they tilt production toward the future and underproduce in the present even more than they would in a world of perfect certainty. Therefore, states should set extractive per-unit taxes such that they increase over time at a rate faster than the interest rate to motivate an increase in production in the present relative to the future.
Year of publication: |
1992
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Authors: | Fain, James R. ; Gade, Mary N. |
Published in: |
Public Finance Review. - Vol. 20.1992, 2, p. 243-255
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Saved in:
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