SPATIALLY VARIABLE TAXATION AND RESOURCE EXTRACTION: THE IMPACT OF STATE OIL TAXES ON DRILLING IN THE US
Payne Institute Faculty Fellow Peter Maniloff, Jason Brown, and Dale Manning estimate the responsiveness of nonrenewable resource firms to taxes on output using spatially explicit data from the oil sector in the United States. Using a model of resource firm capital allocation over space, we show that responses to spatially-varying taxes differ from responses to equivalent changes in the common output price. A larger response to tax rates occurs because the tax change only affects the returns to drilling in a single state, whereas a price change affects both the returns to drilling in a state and the opportunity cost of not drilling in other states. August 5, 2020.