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The Signaling Effect of Tax Policy

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  • FRANCESCA BARIGOZZI
  • BERTRAND VILLENEUVE

Abstract

The paper focuses on the signaling value of a tax when agents are less informed than the government on the effect of their consumption. The policy making process is analyzed as a game in which the government wants to influence consumers' behaviors through tax policy, consumers being rational and Bayesian. The marginal cost of public funds induces the government to provide biased information to pursue budgetary objectives. We analyze the tax distortion that is required for credibility. Copyright 2006 Blackwell Publishing, Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 8 (2006)
Issue (Month): 4 (October)
Pages: 611-630

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Handle: RePEc:bla:jpbect:v:8:y:2006:i:4:p:611-630

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References

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  1. Olsen, Trond E. & Osmundsen, Petter, 2001. "Strategic tax competition; implications of national ownership," Journal of Public Economics, Elsevier, Elsevier, vol. 81(2), pages 253-277, August.
  2. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262121743, December.
  3. Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, Econometric Society, vol. 55(6), pages 1349-65, November.
  4. Charles L. Ballard & Don Fullerton, 1993. "Distortionary Taxes and the Provision of Public Goods," NBER Working Papers 3506, National Bureau of Economic Research, Inc.
  5. Manelli, Alejandro M, 1996. "Cheap Talk and Sequential Equilibria in Signaling Games," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 917-42, July.
  6. Aaron S. Edlin & Pinar Karaca-Mandic, 2006. "The Accident Externality from Driving," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 114(5), pages 931-955, October.
  7. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer, Springer, vol. 2(2), pages 157-183, August.
  8. Brown, Gardner & Layton, David F., 1996. "Resistance economics: social cost and the evolution of antibiotic resistance," Environment and Development Economics, Cambridge University Press, Cambridge University Press, vol. 1(03), pages 349-355, July.
  9. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 101(407), pages 938-48, July.
  10. F. Barigozzi & B. Villeneuve, 2001. "Influencing the Misinformed Misbehaver: An Analysis of Public Policy towards Uncertainty and External Effects," Working Papers 404, Dipartimento Scienze Economiche, Universita' di Bologna.
  11. Hanson, Robin, 2003. "Warning labels as cheap-talk: why regulators ban drugs," Journal of Public Economics, Elsevier, Elsevier, vol. 87(9-10), pages 2013-2029, September.
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Citations

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Cited by:
  1. Manel Antelo, 2005. "Monopoly, asymmetric information, and optimal environmental taxation," Economic Working Papers at Centro de Estudios Andaluces E2005/08, Centro de Estudios Andaluces.
  2. Brännlund, Runar & Lundgren, Tommy & Marklund, Per-Olov, 2014. "Carbon intensity in production and the effects of climate policy—Evidence from Swedish industry," Energy Policy, Elsevier, Elsevier, vol. 67(C), pages 844-857.
  3. D'Haultfoeuille, Xavier & Durrmeyer, Isis & Février, Philippe, 2013. "The Effect of Public Policies on Consumers' Preferences: Lessons from the French Automobile Market," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 422, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Xavier d'Haultfoeuille & Isis Durrmeyer & Philippe Février, 2013. "The Effect of Public Policies on Consumers' Preferences : Lessons from the French Automobile Market," Working Papers, Centre de Recherche en Economie et Statistique 2013-14, Centre de Recherche en Economie et Statistique.
  5. Zaikin, Andrey & Espinola-Arredondo, Ana, 2012. "The Carrot or the Stick: Water Allocation Strategies for Uzbekistan," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124680, Agricultural and Applied Economics Association.
  6. Espínola-Arredondo, Ana & Muñoz-García, Félix, 2013. "When does environmental regulation facilitate entry-deterring practices," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 133-152.
  7. Ghalwash, Tarek, 2004. "Energy Taxes as a Signaling Device: An Empirical Analysis of Consumer Preferences," UmeÃ¥ Economic Studies, UmeÃ¥ University, Department of Economics 646, Umeå University, Department of Economics.
  8. Joan Esteban & Facundo Albornoz & Paolo Vanin, 2009. "Government Information Transparency," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 774.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 10 Feb 2010.
  9. Ghalwash, Tarek, 2007. "Energy taxes as a signaling device: An empirical analysis of consumer preferences," Energy Policy, Elsevier, Elsevier, vol. 35(1), pages 29-38, January.
  10. Manel Antelo, 2005. "Double informational asymmetry, signaling, and environmental taxes," Economic Working Papers at Centro de Estudios Andaluces E2005/25, Centro de Estudios Andaluces.
  11. Antelo, Manel & Loureiro, Maria L., 2009. "Asymmetric information, signaling and environmental taxes in oligopoly," Ecological Economics, Elsevier, Elsevier, vol. 68(5), pages 1430-1440, March.
  12. Ana Espinola-Arredondo & Felix Munoz-Garcia, 2011. "Environmental Protection Agencies: Measuring the Welfare Benefits from Regulation under Different Information Contexts," Working Papers, School of Economic Sciences, Washington State University 2011-11, School of Economic Sciences, Washington State University.
  13. Bettina Bahn-Walkowiak & Raimund Bleischwitz & Martin Distelkamp & Mark Meyer, 2012. "Taxing construction minerals: a contribution to a resource-efficient Europe," Mineral Economics, Springer, Springer, vol. 25(1), pages 29-43, July.

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