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Optimal Taxation and Asymmetric Information in an Economy with Second-Hand Trade

Author

Listed:
  • Aronsson, Thomas

    (Department of Economics, Umeå University)

  • Sjögren, Tomas

    (Department of Economics, Umeå University)

  • Witterblad, Mikael

    (Department of Economics, Umeå University)

Abstract

This paper concerns optimal income and commodity taxation in a two-type overlapping generations model, where used durable goods are traded in a second-hand market. As second-hand transactions are difficult to observe, we assume that the government is unable to directly control second-hand transactions via commodity taxation. A basic question is how the government in this case may use the second-hand market as a channel for relaxation of the self-selection constraint. We show how the appearance of a second-hand market for used durable goods affects the optimal use of labor income and capital income taxation as well as the optimal use of commodity taxation on new durable goods.

Suggested Citation

  • Aronsson, Thomas & Sjögren, Tomas & Witterblad, Mikael, 2008. "Optimal Taxation and Asymmetric Information in an Economy with Second-Hand Trade," Umeå Economic Studies 732, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0732
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    References listed on IDEAS

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    More about this item

    Keywords

    Optimal taxation; Intertemporal Choice; Durable Goods;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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