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Optimal Redistributive Taxation in Credit Markets with Adverse Selection

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  • Anastasios Dosis

    (ESSEC Business School)

Abstract

I study optimal redistributive taxation in credit markets with adverse selection. Under symmetric information, the tax system is non-distortionary and unambiguously benefits high-risk types at the expense of low-risk types. Under asymmetric information, a range of taxes exists that creates Pareto improvements relative to the (zero-tax) market allocation by increasing aggregate investment. For sufficiently high taxes, an increase in the safe interest rate can be accompanied by an increase in investment.

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  • Anastasios Dosis, 2019. "Optimal Redistributive Taxation in Credit Markets with Adverse Selection," Working Papers hal-02130458, HAL.
    • Handle: RePEc:hal:wpaper:hal-02130458
    Note: View the original document on HAL open archive server: https://essec.hal.science/hal-02130458
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    References listed on IDEAS

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    1. Alberto Martin, 2008. "Adverse selection, credit and efficiency: The case of the missing market," Economics Working Papers 1085, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2009.
    2. Scheuer, Florian, 2013. "Adverse selection in credit markets and regressive profit taxation," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1333-1360.
    3. Anastasios Dosis, 2019. "Signalling, Productivity, and Investment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 175(3), pages 459-501.
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    5. Jean Tirole, 2012. "Overcoming Adverse Selection: How Public Intervention Can Restore Market Functioning," American Economic Review, American Economic Association, vol. 102(1), pages 29-59, February.
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    7. Crocker, Keith J. & Snow, Arthur, 1985. "The efficiency of competitive equilibria in insurance markets with asymmetric information," Journal of Public Economics, Elsevier, vol. 26(2), pages 207-219, March.
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    More about this item

    Keywords

    Credit market; Adverse selection; Taxation; Redistribution; Welfare;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property

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