* We would like to thank Lawrence Goulder of Stanford University for many helpful comments. Barry Cinnamon of Akeena Solar was also immensely helpful in providing much of the technical data used in this study. We would also like to thank Oscar Mascarehnas for assistance in an earlier formulation of the model. Finally, we would like to thank James Smith and two anonymous referees for many helpful comments. The remaining errors are of course the full responsibility of the authors.
We use fiscal data on 2,468 oil extraction agreements in 38 countries to study tax contracts between resourcerich countries and independent oil companies. We analyze why expropriations occur and what determines the degree of oil price exposure of host countries. With asymmetric information about a country's expropriation cost, even optimal contracts feature expropriations. Near linearity in the oil price of real-world hydrocarbon contracts also helps to explain expropriations. We show theoretically and verify empirically that oil price insurance provided by tax contracts is increasing in a country's cost of expropriation and decreasing in its production expertise. The timing of actual expropriations is consistent with our model. Disciplines Business | Economics | Public Affairs, Public Policy and Public AdministrationThis journal article is available at ScholarlyCommons: http://repository.upenn.edu/bepp_papers/140 RESOURCE EXTRACTION CONTRACTS UNDER THREAT OF EXPROPRIATION: THEORY AND EVIDENCE Johannes Stroebel and Arthur van Benthem*Abstract-We use fiscal data on 2,468 oil extraction agreements in 38 countries to study tax contracts between resource-rich countries and independent oil companies. We analyze why expropriations occur and what determines the degree of oil price exposure of host countries. With asymmetric information about a country's expropriation cost, even optimal contracts feature expropriations. Near linearity in the oil price of real-world hydrocarbon contracts also helps to explain expropriations. We show theoretically and verify empirically that oil price insurance provided by tax contracts is increasing in a country's cost of expropriation and decreasing in its production expertise. The timing of actual expropriations is consistent with our model.
This paper investigates the relationship between energy demand, economic growth and prices in 24 non-OECD countries and three sectors from 1978 -2003. We estimate linear and non-linear income and price elasticities, using time fixed effects to control for unobserved dynamic effects such as technological change. We also test for asymmetric responses to price changes. The analysis leads to the following conclusions. First, the income elasticity of energy demand is high and increases with income, both on the country and the sector level. Second, energy demand is more responsive to end-use price than international oil price changes. Third, the price elasticity of energy demand increases with the price level. This result, driven by the residential and agricultural sector, is new to the literature for developing countries, and is consistent with the hypothesis of stronger responsiveness to high energy prices. Finally, we find that after including time fixed effects, allowing for price asymmetry adds little to the results.
Fourteen U.S. states recently pledged to adopt limits on greenhouse gases (GHGs) per mile of light-duty automobiles. Previous analyses predicted this action would significantly reduce emissions from new cars in these states, but ignored possible offsetting emissions increases from policy-induced adjustments in new car markets in other (non-adopting) states and in the used car market.Such offsets (or "leakage") reflect the fact that the state-level effort interacts with the national corporate average fuel economy (CAFE) standard: the state-level initiative effectively loosens the national standard and gives automakers scope to profitably increase sales of high-emissions automobiles in non-adopting states. In addition, although the state-level effort may well spur the invention of fuel-and emissions-saving technologies, interactions with the federal CAFE standard limit the nationwide emissions reductions from such advances. Using a multi-period numerical simulation model, we find that 70-80 percent of the emissions reductions from new cars in adopting states are offset by emissions leakage.This research examines a particular instance of a general issue of policy significance -namely, problems from "nested" federal and state environmental regulations. Such nesting implies that similar leakage difficulties are likely to arise under several newly proposed state-level initiatives.
We estimate the sensitivity of scrap decisions to changes in used car values -the "scrap elasticity" -and show how it influences used car fleets under policies aimed at reducing gasoline use. Large scrap elasticities produce emissions leakage under efficiency standards as the longevity of used vehicles is increased, a process known as the Gruenspecht effect. To explore the magnitude of this leakage we assemble a novel dataset of U.S. used vehicle registrations and prices, which we relate through time via differential effects in gasoline cost: A gasoline price increase or decrease of $1 changes used vehicle prices and alters the number of fuel-efficient vs. fuel-inefficient vehicles scrapped by 18%. These relationships allow us to provide what we believe are the first estimates of the scrap elasticity itself, which we find to be about -0.7. When applied in a model of fuel economy standards, the central elasticities we estimate suggest that 12-17% of the expected fuel savings will leak away through the used vehicle market. This considerably reduces the cost-effectiveness of the standard, rivaling or exceeding the importance of the often-cited mileage "rebound" effect.
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