NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Niko Jaakkola

Ifo Center for Energy, Climate
and Exhaustible Resources
Ifo Institute
Poschingerstrasse 5
81679 M√ľnchen

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Institutional Affiliation: Ifo Institute

NBER Working Papers and Publications

July 2016Finders, Keepers?
with Daniel Spiro, Arthur A. van Benthem: w22421
Natural-resource taxation and investment exhibit cycles in a vast number of countries, driving political turmoil and power shifts. Using a rational-expectations model, we show cycles result from governments' inability to commit to future taxes and firms' inability to credibly exit a country indefinitely. A government sets a low initial tax inducing high investments, which in turn prompts it to increase taxes next period. This induces low investment thus low future taxes, and so on. We investigate which factors reinforce cycles and present ways of avoiding them, and document cycles across many countries including detailed case studies of two Latin-American countries.

Published: Niko Jaakkola & Daniel Spiro & Arthur A. van Benthem, 2019. "Finders, keepers?," Journal of Public Economics, vol 169, pages 17-33. citation courtesy of

 
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