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The taxation of trades in assets

  • Citanna, A.
  • Polemarchakis, H.M.
  • Tirelli, M.

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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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 126 (2006)
Issue (Month): 1 (January)
Pages: 299-313

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Handle: RePEc:eee:jetheo:v:126:y:2006:i:1:p:299-313
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  1. Mario Tirelli, 2003. "Income taxation when markets are incomplete," Decisions in Economics and Finance, Springer, vol. 26(2), pages 97-128, November.
  2. HERINGS, Jean-Jacques & POLEMARCHAKIS, Heracles, 1998. "Pareto improving price regulation when the asset market is incomplete," CORE Discussion Papers 1998041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. James Tobin, 1978. "A Proposal for International Monetary Reform," Cowles Foundation Discussion Papers 506, Cowles Foundation for Research in Economics, Yale University.
  4. Dow, James & Rahi, Rohit, 2000. "Should Speculators Be Taxed?," The Journal of Business, University of Chicago Press, vol. 73(1), pages 89-107, January.
  5. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-92, May.
  6. Alberto Bisin & John Geanakoplos & Piero Gottardi & Enrico Minelli & Heracles Polemarchakis, 2009. "Markets and Contracts," Working Papers 0915, University of Brescia, Department of Economics.
  7. 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).
  8. Guesnerie, Roger, 1979. "General statements on second best pareto optimality," Journal of Mathematical Economics, Elsevier, vol. 6(2), pages 169-194, July.
  9. Alan J. Auerbach, 1982. "The Theory of Excess Burden and Optimal Taxation," NBER Working Papers 1025, National Bureau of Economic Research, Inc.
  10. 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.
  11. 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.
  12. Guesnerie Roger, 1976. "On the direction of tax reform," CEPREMAP Working Papers (Couverture Orange) 7603, CEPREMAP.
  13. J. A. Mirrlees, 1976. "Optimal Tax Theory: A Synthesis," Working papers 176, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. 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.
  15. David Cass & Alessandro Citanna, 1998. "Pareto improving financial innovation in incomplete markets," Economic Theory, Springer, vol. 11(3), pages 467-494.
  16. 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.
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