2008 Outstanding Master’s Thesis – Wayne Leighty
Wayne’s thesis models and analyzes the dynamic optimality of oil production decisions in Alaska, and assesses the effects of government tax and regulatory policy on production decisions and their optimality.
Wayne’s research has the potential to make a large impact on policy. According to his results, a fixed tax rate on gross revenue is the first-best policy because it does not distort the optimal production path. Tax policies that introduce components to influence the production path (e.g., credits) result in lower net social benefit. Thus, government can increase revenue without altering the production path or net social benefit by increasing the tax rate. Government can also shift the production path with, for example, a system of credits, but at the expense of lower net social benefit. Given the evolving nature of the tax structure in Alaska, Wayne’s analysis of the effects taxes will be of particular interest to policy-makers.
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