Macroeconomics Seminar Series. "Extracting Wedges: Misallocation and Taxation in the Oil Industry" (Joint Work with Lassi Ahlvik, Jørgen Juel Andersen, Torfinn Harding, and Alex Trew)
Published: 12 March 2025
08 May 2025. Dr Radoslaw (Radek) Stefanski, University of St Andrews
Dr Radoslaw (Radek) Stefanski, University of St Andrews
"Extracting Wedges: Misallocation and Taxation in the Oil Industry" (Joint Work with Lassi Ahlvik, Jørgen Juel Andersen, Torfinn Harding, and Alex Trew)
Thursday, 08 May 2025. 15:00-16:30
Room 141A, Adam Smith Business School
Abstract
How large are the productivity differences arising from tax policy? This paper examines the role of revenue taxes in explaining misallocation and productivity differences for a single large sector that produces a homogenous, globally-traded good: the oil and gas industry. First, we use a model-based approach and the universe of field-level data to estimate the total distortions, or ``wedges", that impact the allocation of inputs at the extensive and intensive margin across fields, firms, and countries. Second, we decompose these wedges to determine the proportion attributable to heterogeneity in revenue tax rates. Misallocation is significant in the oil industry: distortions suppress global productivity by 53\%. Strikingly, over half of this misallocation can be accounted for by differences in revenue tax rates across fields. Moreover, nearly all of the impact of revenue taxes operates through the intensive margin (the inputs allocated at a field) rather than the extensive margin (the choice to enter a field). These findings highlight the critical importance of tax policy in shaping productivity through its effect on the efficient allocation of resources.
Bio
Radek Stefanski is a Senior Lecturer at the University of St Andrews and an External Research Associate at the Oxford Centre for the Analysis of Resource Rich Economies. His research focuses on macroeconomics, growth, and natural resources, with particular emphasis on structural transformation and economic misallocation.
Stefanski's work includes developing methods to measure fossil fuel subsidies through emission intensity patterns and analyzing how tax-driven wedges affect resource allocation in the oil industry. His recent research explores how selection processes might explain long-term trends in interest rates and societal patience. Published in leading journals such as the Journal of International Economics, The Economic Journal, Review of Economic Dynamics, and Journal of Political Economy Macroeconomics, Stefanski's expertise spans from growth economics to environmental policy.
In his latest project, Stefanski is collaborating with colleagues to use natural language processing models to analyze how cultural values evolved throughout Roman history by examining the entire surviving corpus of Latin literature. This innovative approach aims to shed light on why certain regions maintained stronger economic institutions after the Empire's collapse and why some Roman economic practices persisted in particular areas.
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First published: 12 March 2025