Adverse selection, commitment and exhaustible resource taxation

Abstract

This paper studies the contractual relationship between a government and a firm in charge of the extraction of an exhaustible resource. Governments design taxation scheme to capture resource rent and they usually propose contracts with limited duration and possess less information on resources than the extractive firms do. This article investigates how information asymmetry on costs and an inability to commit to long-term contracts affect tax revenue and the extraction path. This study gives several unconventional results. First, when information asymmetry exists, the inability to commit does not necessarily lower tax revenues. Second, under asymmetric information without commitment, an efficient firm may produce during the first period more or less than under symmetric information.Hence, the inability to commit has an ambiguous effect on the exhaustion date. Third, the modified Hotelling's rule is such that an increase in the discount factor does not necessarily reduce the first-period extraction.

Does the Water Resource Tax Reform Bring Positive Effects to Green Innovation and Productivity in High Water-Consuming Enterprises?

“…Levying a resource tax plays an important role in promoting green economic development (Mikhno et al, 2021) [18]. Illustrating this, Ing (2020) called for government policies to regulate the extraction of non-renewable water resources by imposing resource taxes and limiting the time frame for companies to extract those resources [4].…”

“…Secondly, the influencing factors of intermediate input variables are limited to capital and technology, i.e., m it = m it (ω it , k it ) (1-3). Thirdly, the assumption was made that, when capital investment remains constant, the intermediate input variable increases in line with the increase in TFP, and the two are monotonically increasing functions, i.e., ω it = ω it (m it , k it ) (1)(2)(3)(4). Substituting Models (1-2), (1-3), and (1-4) into Model (1-1) yields Model (1-5), which is (1)(2)(3)(4)(5).…”

“…Thirdly, the assumption was made that, when capital investment remains constant, the intermediate input variable increases in line with the increase in TFP, and the two are monotonically increasing functions, i.e., ω it = ω it (m it , k it ) (1)(2)(3)(4). Substituting Models (1-2), (1-3), and (1-4) into Model (1-1) yields Model (1-5), which is (1)(2)(3)(4)(5). Once Model (1-5) is estimated, all coefficients in the production function will be successfully estimated.…”

“…This highlights the need for the government to regulate resource prices to protect resources, reduce resource usage, and improve resource utilization efficiency. Ing (2020) proposed that the government should design relevant tax policies to generate resource rents and alleviate resource depletion problems [4]. Welsch (2008) studied mineral resource externalities, positing that the presence of negative externalities indicates that the government should impose corresponding taxes and fees on miners to effectively address the associated problems [5].…”

Information Asymmetry and Card Debt Crisis in Taiwan

“…For example, Bigelow (1990) studied ex-ante and interim constrained efficiency of market equilibria with adverse selection and found that with a continuum of qualities, allocations which are attainable are convex combinations of onestep allocations, which makes possible a simple geometric treatment of efficiency. Ing (2020) investigated the contractual relationship between a government and a firm in charge of the extraction of an exhaustible resource. The truth is that governments design taxation scheme to capture resource rent and they usually propose contracts with limited duration and process less information on resources than extractive firms do.…”