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  3. American Economic Journal: Economic Policy
  4. November 2018
  5. Taxes and US Oil Production: Evidence from California and the Windfall Profit Tax

Taxes and US Oil Production: Evidence from California and the Windfall Profit Tax

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Abstract

The recent boom in U.S. oil production has prompted debates on levying new taxes on oil. This paper uses new well-level production data and price variation from federal oil taxes and price controls to assess how taxes affected production. After-tax price elasticity estimates range between 0.295 (0.038) and 0.371 (0.025). Response along the shut-in margin is minimal. There is no evidence of spatial shifting of production to minimize tax liabilities. Taken together the results suggest that taxes reduced domestic production in the 1980s, and the response largely came from wells that continued to pump oil, but at a reduced rate.

Citation

Rao, Nirupama L. 2018. "Taxes and US Oil Production: Evidence from California and the Windfall Profit Tax." American Economic Journal: Economic Policy, 10 (4): 268-301. DOI: 10.1257/pol.20140483

Additional Materials

JEL Classification

  • H25 Business Taxes and Subsidies including sales and value-added (VAT)
  • H32 Fiscal Policies and Behavior of Economic Agents: Firm
  • L71 Mining, Extraction, and Refining: Hydrocarbon Fuels
  • L78 Industry Studies: Primary Products and Construction: Government Policy
  • Q35 Hydrocarbon Resources
  • Q38 Nonrenewable Resources and Conservation: Government Policy
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