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The Taxation of Trades in assets

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  • CITANNA, Alessandro
  • POLEMARCHAKIS, Heracles M.

    (Brown University, Providence)

  • TIRELLI, M.

    (Université Catholique de Louvain)

Abstract

When the asset market is incomplete, there typically exist taxes on trades in assets and a redistribution of revenue in the asset market that are Pareto improving. The policy is anonymous, it economizes on complexity, and it results in ex post Pareto optimal allocations, it is publicly announced before markets open, thus fully and correctly anticipated by traders, it does not require that financial markets be shut down, and it does not modify the asset market structure. As such, it improves over previously proposed constrained interventions.

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Bibliographic Info

Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 721.

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Length: 19 pages
Date of creation: 01 Dec 2000
Date of revision:
Handle: RePEc:ebg:heccah:0721

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Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
Web page: http://www.hec.fr/
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Keywords: taxes; incomplete asset market; equilibrium; pareto; improvement;

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References

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  1. David Cass & Alessandro Citanna, 1998. "Pareto improving financial innovation in incomplete markets," Economic Theory, Springer, vol. 11(3), pages 467-494.
  2. Herings,P. Jean-Jacques & Polemarchakis,H. M., 2000. "Pareto Improving Price Regulation When the Asset Market Is Incomplete," Research Memorandum 008, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  3. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-92, May.
  4. TIRELLI, Mario, 2000. "Constrained suboptimality and financial innovation in GEI with a single commodity," CORE Discussion Papers 2000019, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Alan J. Auerbach, 1982. "The Theory of Excess Burden and Optimal Taxation," NBER Working Papers 1025, National Bureau of Economic Research, Inc.
  6. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-78, June.
  7. Guesnerie, Roger, 1979. "General statements on second best pareto optimality," Journal of Mathematical Economics, Elsevier, vol. 6(2), pages 169-194, July.
  8. Rohit Rahi & James Dow, 1998. "Should Speculators be Taxed?," FMG Discussion Papers dp291, Financial Markets Group.
  9. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
  10. Kajii Atsushi, 1994. "Anonymity and Optimality of Competitive Equilibria when Markets Are Incomplete," Journal of Economic Theory, Elsevier, vol. 64(1), pages 115-129, October.
  11. Alberto Bisin & John Geanakoplos & Piero Gottardi & Enrico Minelli & Herakles Polemarchakis, 2010. "Markets and contracts," Economics Working Papers ECO2010/29, European University Institute.
    • Alberto Bisin & John Geanakoplos & Piero Gottardi & Enrico Minelli & Heracles Polemarchakis, 2009. "Markets and Contracts," Working Papers 0915, University of Brescia, Department of Economics.
  12. Mario Tirelli, 2003. "Income taxation when markets are incomplete," Decisions in Economics and Finance, Springer, vol. 26(2), pages 97-128, November.
  13. Hart, Oliver D., 1975. "On the optimality of equilibrium when the market structure is incomplete," Journal of Economic Theory, Elsevier, vol. 11(3), pages 418-443, December.
  14. James Tobin, 1978. "A Proposal for International Monetary Reform," Cowles Foundation Discussion Papers 506, Cowles Foundation for Research in Economics, Yale University.
  15. Guesnerie Roger, 1976. "On the direction of tax reform," CEPREMAP Working Papers (Couverture Orange) 7603, CEPREMAP.
  16. Atsushi Kajii & Antonio Villanacci & Alessandro Citanna, 1998. "Constrained suboptimality in incomplete markets: a general approach and two applications," Economic Theory, Springer, vol. 11(3), pages 495-521.
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