IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v190y2020ics0165176520300811.html
   My bibliography  Save this article

Tax on name

Author

Listed:
  • Sun, Yibo
  • Wang, Bo

Abstract

How to tax the name? We answer this question by introducing a name market in the sense of Tadelis (1999) into an endogenous growth model in which an informational asymmetry exists between capital producing borrowers and lenders. We show a name market endogenously arises to screen the borrowers but at the cost of crowding out investment. We derive the optimal name price that trades off the screening effect and the crowding out effect and show this optimal price decreases with the investor protection level. An optimal tax scheme should tax the name to this optimal price and reimburse the tax revenue to the name buyer. When the investor protection level is low, the net worth could be lower than the optimal name price, so capital income tax shall be allowed to subsidy the name purchase to activate the name market. Overall, we show the optimal tax scheme in the presence of a name market depends crucially on the country’s investor protection level.

Suggested Citation

  • Sun, Yibo & Wang, Bo, 2020. "Tax on name," Economics Letters, Elsevier, vol. 190(C).
    • Handle: RePEc:eee:ecolet:v:190:y:2020:i:c:s0165176520300811
    DOI: 10.1016/j.econlet.2020.109089
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176520300811
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2020.109089?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Joyee Deb, 2012. "Observability and Sorting in a Market for Names," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(2), pages 301-338, June.
    2. Fuchs, William & Green, Brett & Papanikolaou, Dimitris, 2016. "Adverse selection, slow-moving capital, and misallocation," Journal of Financial Economics, Elsevier, vol. 120(2), pages 286-308.
    3. Alberto Martin & Jaume Ventura, 2016. "Managing Credit Bubbles," Journal of the European Economic Association, European Economic Association, vol. 14(3), pages 753-789, June.
    4. George J. Mailath & Larry Samuelson, 2001. "Who Wants a Good Reputation?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(2), pages 415-441.
    5. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    6. Bose, Niloy & Cothren, Richard, 1996. "Equilibrium loan contracts and endogenous growth in the presence of asymmetric information," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 363-376, October.
    7. Hendrik Hakenes & Martin Peitz, 2007. "Observable Reputation Trading," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 693-730, May.
    8. Rui Castro & Gian Luca Clementi & Glenn MacDonald, 2004. "Investor Protection, Optimal Incentives, and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(3), pages 1131-1175.
    9. Ho, Wai-Hong & Wang, Yong, 2007. "Factor income taxation and growth under asymmetric information," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 775-789, April.
    10. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
    11. Steven Tadelis, 2002. "The Market for Reputations as an Incentive Mechanism," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 854-882, August.
    12. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Varaidzo Denhere & David Mhlanga, 2021. "The Use of Surrogate Currency to Address Liquidity Crisis: The Zimbabwean Experience," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 9(3), pages 159-169.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Raurich, Xavier & Seegmuller, Thomas, 2019. "On the interplay between speculative bubbles and productive investment," European Economic Review, Elsevier, vol. 111(C), pages 400-420.
    2. Markus K. Brunnermeier & Thomas M. Eisenbach & Yuliy Sannikov, 2012. "Macroeconomics with Financial Frictions: A Survey," Levine's Working Paper Archive 786969000000000384, David K. Levine.
    3. Max Blouin & Jean-Marc Bourgeon, 2008. "Practices (revised)," Cahiers de recherche 0805, CIRPEE.
    4. Vladimir Asriyan & William Fuchs & Brett Green, 2019. "Liquidity Sentiments," American Economic Review, American Economic Association, vol. 109(11), pages 3813-3848, November.
    5. Joyee Deb, 2012. "Observability and Sorting in a Market for Names," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(2), pages 301-338, June.
    6. Max Blouin & Jean-Marc Bourgeon, 2008. "Practices," Working Papers hal-00360512, HAL.
    7. Bernardita Vial & Felipe Zurita, 2017. "Entrants' Reputation And Industry Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(2), pages 529-559, May.
    8. Omer Moav & Zvika Neeman, 2004. "Inspection in Markets for Experience Goods," Discussion Paper Series dp349, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    9. Doherty, Neil A. & Kartasheva, Anastasia V. & Phillips, Richard D., 2012. "Information effect of entry into credit ratings market: The case of insurers' ratings," Journal of Financial Economics, Elsevier, vol. 106(2), pages 308-330.
    10. Wai‐Hong Ho & Yong Wang, 2013. "Asymmetric Information, Auditing Commitment, and Economic Growth," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(2), pages 611-633, May.
    11. Luís Almeida Costa & Luís Vasconcelos, 2010. "Share the Fame or Share the Blame? The Reputational Implications of Partnerships," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 259-301, June.
    12. Etro, Federico, 2017. "Research in economics and game theory. A 70th anniversary," Research in Economics, Elsevier, vol. 71(1), pages 1-7.
    13. Heski Bar-Isaac, 2007. "Something to prove: reputation in teams," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 495-511, June.
    14. Wang, Bo & Zheng, Suli, 2023. "Asymmetric information, credit market and the optimal regulation of brand market," Finance Research Letters, Elsevier, vol. 56(C).
    15. Chen, Yong & Mak, Barry & Li, Zhou, 2013. "Quality deterioration in package tours: The interplay of asymmetric information and reputation," Tourism Management, Elsevier, vol. 38(C), pages 43-54.
    16. Bernardita Vial & Felipe Zurita, 2013. "Reputation-Driven Industry Dynamics," Documentos de Trabajo 436, Instituto de Economia. Pontificia Universidad Católica de Chile..
    17. König, Philipp J. & Pothier, David, 2018. "Safe but fragile: Information acquisition, sponsor support and shadow bank runs," Discussion Papers 15/2018, Deutsche Bundesbank.
    18. Haizhou Huang & Chenggang Xu, 1999. "Financial Institutions, Financial Contagion, and Financial Crises," CID Working Papers 21, Center for International Development at Harvard University.
    19. Razin, Assaf & Goldstein, Itay, 2003. "An Information-Based Trade-off Between Foreign Direct Investment and Foreign Portfolio Investment: Volatility, Transparency and," CEPR Discussion Papers 3747, C.E.P.R. Discussion Papers.
    20. Hajime Tomura, 2010. "Liquidity Transformation and Bank Capital Requirements," Staff Working Papers 10-22, Bank of Canada.

    More about this item

    Keywords

    Asymmetric information; Name market; Reimbursement tax;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • G3 - Financial Economics - - Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:190:y:2020:i:c:s0165176520300811. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.