Publication Type
Journal Article
Version
submittedVersion
Publication Date
8-2018
Abstract
The manner in which governments charge mineral resource producers has been the subject of considerable debate. Income-based charges such as resource rent taxes have been advocated on the theory that royalties and other output-based charges create inefficiency by distorting production decisions. Using a principal-agent approach to resource contracts, separating asset ownership from asset use, we demonstrate that royalties can be efficient under conditions of certainty and also when there is uncertainty and asymmetric information. Royalties serve a key pricing purpose, signaling the marginal impact of extraction on the residual value of reserves and surrounding land or sea.
Discipline
Public Economics
Research Areas
Applied Microeconomics
Publication
Land Economics
Volume
94
Issue
3
First Page
340
Last Page
353
ISSN
0023-7639
Identifier
10.3368/le.94.3.340
Publisher
University of Wisconsin Press
Citation
CONRAD, Robert F.; HOOL, Robert Bryce; and NEKIPELOV, Denis.
The role of royalties in resource extraction contracts. (2018). Land Economics. 94, (3), 340-353.
Available at: https://ink.library.smu.edu.sg/soe_research/2338
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.3368/le.94.3.340