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Government Information Transparency

  • Facundo Albornoz
  • Joan Esteban
  • and Paolo Vanin

This paper studies a model of announcements by a privately informed government about the future state of the economic activity in an economy subject to recurrent shocks and with distortions due to income taxation. Although transparent communication would ex ante be desirable, we find that even a benevolent government may ex-post be non-informative, in an attempt to countervail the tax distortion with a 'second best' compensating distortion in information. This result provides a rationale for independent national statistical offices, committed to truthful communication. We also find that whether inequality in income distribution favors or harms government transparency depends on labor supply elasticity.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 392.

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Date of creation: May 2009
Date of revision:
Handle: RePEc:bge:wpaper:392
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  1. Blinder, Alan S. & Ehrmann, Michael & de Haan, Jakob & Fratzscher, Marcel & Jansen, David-Jan, 2008. "Central Bank communication and monetary policy: a survey of theory and evidence," Working Paper Series 0898, European Central Bank.
  2. Alessandro Gavazza & Alessandro Lizzeri, 2009. "Transparency and Economic Policy," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 1023-1048.
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  4. Manuel Amador & Pierre Olivier Weill, 2008. "Learning from Prices: Public Communication and Welfare," 2008 Meeting Papers 390, Society for Economic Dynamics.
  5. Milesi-Ferretti, Gian Maria, 2001. "Good, Bad or Ugly? On the Effects of Fiscal Rules with Creative Accounting," CEPR Discussion Papers 2663, C.E.P.R. Discussion Papers.
  6. Petra Geraats, 2009. "Trends in Monetary Policy Transparency," CESifo Working Paper Series 2584, CESifo Group Munich.
  7. KOHLBERG, Elon & MERTENS, Jean-François, . "On the strategic stability of equilibria," CORE Discussion Papers RP 716, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Cho, In-Koo, 1987. "A Refinement of Sequential Equilibrium," Econometrica, Econometric Society, vol. 55(6), pages 1367-89, November.
  9. Richard Arnott & Joseph E Stiglitz, 2010. "Randomization with Asymmetric Information," Levine's Working Paper Archive 2054, David K. Levine.
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  14. Weiss, Laurence, 1976. "The Desirability of Cheating Incentives and Randomness in the Optimal Income Tax," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1343-52, December.
  15. Faust, J. & Svensson, L.E.O., 1999. "The Equilibrium Degree of Transparency and Control in Monetary Policy," Papers 669, Stockholm - International Economic Studies.
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  17. Rodriguez Mora, Jose V. & Schulstad, Paul, 2007. "The effect of GNP announcements on fluctuations of GNP growth," European Economic Review, Elsevier, vol. 51(8), pages 1922-1940, November.
  18. Seonghwan Oh & Michael Waldman, 2005. "The Index of Leading Economic Indicators as a Source of Expectational Shocks," Eastern Economic Journal, Eastern Economic Association, vol. 31(1), pages 75-95, Winter.
  19. Demertzis, Maria & Hughes Hallett, Andrew, 2002. "Central Bank Transparency in Theory and Practice," CEPR Discussion Papers 3639, C.E.P.R. Discussion Papers.
  20. Ying Chen & Navin Kartik & Joel Sobel, 2008. "Selecting Cheap-Talk Equilibria," Econometrica, Econometric Society, vol. 76(1), pages 117-136, 01.
  21. Jeffery D. Amato & Hyun Song Shin & Stephen Morris, 2003. "Communication and monetary policy," BIS Working Papers 123, Bank for International Settlements.
  22. 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.
  23. Faust, Jon & Svensson, Lars E O, 2001. "Transparency and Credibility: Monetary Policy with Unobservable Goals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 369-97, May.
  24. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1367-1389, September.
  25. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
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  28. Xavier Debrun & Jean Pisani-Ferry & Andr� Sapir, 2008. "Government size and output volatility: should we forsake automatic stabilization?," European Economy - Economic Papers 316, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  29. Stephen Morris, 1999. "Political Correctness," Cowles Foundation Discussion Papers 1242, Cowles Foundation for Research in Economics, Yale University.
  30. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  31. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  32. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
  33. Sleet, Christopher, 2001. "On Credible Monetary Policy and Private Government Information," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 338-376, July.
  34. repec:tpr:qjecon:v:105:y:1990:i:4:p:1017-34 is not listed on IDEAS
  35. repec:oup:qjecon:v:105:y:1990:i:4:p:1017-34 is not listed on IDEAS
  36. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
  37. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
  38. Oh, S. & Waldman, M., 1990. "The Macroeconomic Effects Of False Announcements," Papers 17, California Los Angeles - Applied Econometrics.
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