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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.

Suggested Citation

  • Francesca Barigozzi & Bertrand Villeneuve, 2006. "The Signaling Effect of Tax Policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(4), pages 611-630, October.
    • Handle: RePEc:bla:jpbect:v:8:y:2006:i:4:p:611-630
    DOI: 10.1111/j.1467-9779.2006.00281.x
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    1. Bettina Bahn-Walkowiak & Raimund Bleischwitz & Martin Distelkamp & Mark Meyer, 2012. "Taxing construction minerals: a contribution to a resource-efficient Europe," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 25(1), pages 29-43, July.
    2. Manel Antelo, 2005. "Monopoly, asymmetric information, and optimal environmental taxation," Economic Working Papers at Centro de Estudios Andaluces E2005/08, Centro de Estudios Andaluces.
    3. Ana Espínola-Arredondo & Félix Muñoz-Garcia & Jude Bayham, 2014. "The Entry-Deterring Effects of Inflexible Regulation," Canadian Journal of Economics, Canadian Economics Association, vol. 47(1), pages 298-324, February.
    4. Cristina Álvarez-Sánchez & Isobel Contento & Alejandra Jiménez-Aguilar & Pamela Koch & Heewon Lee Gray & Laura A Guerra & Juan Rivera-Dommarco & Rebeca Uribe-Carvajal & Teresa Shamah-Levy, 2018. "Does the Mexican sugar-sweetened beverage tax have a signaling effect? ENSANUT 2016," PLOS ONE, Public Library of Science, vol. 13(8), pages 1-18, August.
    5. 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.
    6. Manel Antelo, 2005. "Double informational asymmetry, signaling, and environmental taxes," Economic Working Papers at Centro de Estudios Andaluces E2005/25, Centro de Estudios Andaluces.
    7. Tyutyuryukov Vladimir, 2016. "What can VAT Statistics Tell Politicians? (with a Focus on EAEU Data)," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 9(2), pages 239-269, December.
    8. Facundo Albornoz & Joan Esteban & Paolo Vanin, 2009. "Government Information Transparency," Discussion Papers 09-03, Department of Economics, University of Birmingham.
    9. Antelo, Manel & Loureiro, Maria L., 2009. "Asymmetric information, signaling and environmental taxes in oligopoly," Ecological Economics, Elsevier, vol. 68(5), pages 1430-1440, March.
    10. 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 124680, Agricultural and Applied Economics Association.
    11. MAHENC Philippe, 2008. "Introducing Greens Goods," LERNA Working Papers 08.03.247, LERNA, University of Toulouse.
    12. Akira Miyaoka, 2019. "The Signaling Effect of Emission Taxes Under International Duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(3), pages 691-720, March.
    13. Silvia Tiezzi & Stefano F. Verde, 2019. "The signaling effect of gasoline taxes and its distributional implications," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(2), pages 145-169, June.
    14. Manel Antelo & Maria L. Loureiro, 2009. "Soft Fiscal Policies for a Polluting Monopolist," The Energy Journal, , vol. 30(2_suppl), pages 169-192, December.
    15. D’Antoni, Massimo & Galbiati, Roberto, 2007. "A signaling theory of nonmonetary sanctions," International Review of Law and Economics, Elsevier, vol. 27(2), pages 204-218.
    16. 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, vol. 67(C), pages 844-857.
    17. 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 422, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    18. Ana Espinola-Arredondo & Felix Munoz-Garcia, 2011. "Environmental Protection Agencies: Measuring the Welfare Benefits from Regulation under Different Information Contexts," Working Papers 2011-11, School of Economic Sciences, Washington State University.
    19. Silvia Tiezzi & Stefano F. Verde, 2017. "The signaling effect of gasoline taxes and its distributional implications," RSCAS Working Papers 2017/06, European University Institute.
    20. D’Haultfœuille, Xavier & Durrmeyer, Isis & Février, Philippe, 2016. "Disentangling sources of vehicle emissions reduction in France: 2003–2008," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 186-229.
    21. Silvia Tiezzi & Stefano F. Verde, 2019. "The signaling effect of gasoline taxes and its distributional implications," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(2), pages 145-169, June.
    22. Ghalwash, Tarek, 2007. "Energy taxes as a signaling device: An empirical analysis of consumer preferences," Energy Policy, Elsevier, vol. 35(1), pages 29-38, January.
    23. Ghalwash, Tarek, 2004. "Energy Taxes as a Signaling Device: An Empirical Analysis of Consumer Preferences," Umeå Economic Studies 646, Umeå University, Department of Economics.

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    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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