On the asymmetric effects of oil price changes on Alaska oil tax revenue

ABSTRACT

Alaska depends on oil tax revenue for more than 90% of the state budget. In this article, we apply the nonlinear autoregressive distributed lag (ARDL) approach of to test whether the effect of changes in oil prices on Alaska’s oil reven ues is symmetric or asymmetric. The results show that oil prices have an asymmetric effect on Alaska’s oil revenues in the long run, though not in the short run. Additionally, declines in oil prices have a more substantial long-run effect than increases in oil prices.

KEYWORDS:

• Alaska
• asymmetry
• nonlinear ARDL
• oil prices
• revenue

Notes

¹ There have been a few articles that address the asymmetry of oil prices on macroeconomic variables in oil importing countries (e.g., Lardic and Mignon 2008; Mory 1993; Papapetrou 2013).

² Alaska’s oil production was found to be statistically insignificant and was not included in the final model. One plausible explanation for this finding is that according to the current oil tax structure in Alaska, oil revenues are more dependent on the oil price since the tax is calculated from the production value of the oil.