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Government Information Transparency

  • Facundo Albornoz
  • Joan Esteban
  • Paolo Vanin

This paper studies a model of announcements by a privately in- formed 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 re- sult 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 trans- parency depends on labor supply elasticity.

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File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/09-03.pdf
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Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 09-03.

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Length: 47 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:bir:birmec:09-03
Contact details of provider: Postal: Edgbaston, Birmingham, B15 2TT
Web page: http://www.economics.bham.ac.uk

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  1. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
  2. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  3. Ying Chen & Navin Kartik & Joel Sobel, 2008. "Selecting Cheap-Talk Equilibria," Econometrica, Econometric Society, vol. 76(1), pages 117-136, 01.
  4. Milesi-Ferretti, Gian Maria, 2004. "Good, bad or ugly? On the effects of fiscal rules with creative accounting," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 377-394, January.
  5. 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.
  6. Athey, Susan & Atkeson, Andrew & Kehoe, Patrick J., 2004. "The optimal degree of discretion in monetary policy," Working Paper Series 0338, European Central Bank.
  7. Joan Esteban & Debraj Ray, 2006. "Inequality, Lobbying, and Resource Allocation," American Economic Review, American Economic Association, vol. 96(1), pages 257-279, March.
  8. Svensson, Lars E.O. & Faust, John, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," Seminar Papers 636, Stockholm University, Institute for International Economic Studies.
  9. Manuel Amador & Pierre-Olivier Weill, 2010. "Learning from Prices: Public Communication and Welfare," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 866 - 907.
  10. Svensson, Lars & Faust, Jon, 1999. "The Equilibrium Degree of Transparency and Control in Monetary Policy," Seminar Papers 669, Stockholm University, Institute for International Economic Studies.
  11. Jeffery Amato & Stephen Morris & Hyun Song Shin, 2003. "Communication and Monetary Policy," Levine's Working Paper Archive 506439000000000330, David K. Levine.
  12. 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.
  13. George-Marios Angeletos & Alessandro Pavan, 2007. "Policy with Dispersed Information," NBER Working Papers 13590, National Bureau of Economic Research, Inc.
  14. Petra Geraats, 2009. "Trends in Monetary Policy Transparency," CESifo Working Paper Series 2584, CESifo Group Munich.
  15. 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.
  16. Sleet, Christopher, 2001. "On Credible Monetary Policy and Private Government Information," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 338-376, July.
  17. 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.
  18. Oh, S. & Waldman, M., 1990. "The Macroeconomic Effects Of False Announcements," Papers 17, California Los Angeles - Applied Econometrics.
  19. Richard Arnott & Joseph E Stiglitz, 2010. "Randomization with Asymmetric Information," Levine's Working Paper Archive 2054, David K. Levine.
  20. Christopher Sleet, 2004. "Optimal Taxation with Private Government Information," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1217-1239, October.
  21. repec:bla:restud:v:76:y:2009:i:3:p:1023-1048 is not listed on IDEAS
  22. repec:rje:randje:v:37:y:2006:1:p:155-175 is not listed on IDEAS
  23. Alessandro Gavazza & Alessandro Lizzeri, 2009. "Transparency and Economic Policy," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 1023-1048.
  24. 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.
  25. Demertzis, Maria & Hughes Hallett, Andrew, 2007. "Central Bank transparency in theory and practice," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 760-789, December.
  26. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," NBER Working Papers 13932, National Bureau of Economic Research, Inc.
  27. Cho, In-Koo, 1987. "A Refinement of Sequential Equilibrium," Econometrica, Econometric Society, vol. 55(6), pages 1367-89, November.
  28. Kohlberg, Elon & Mertens, Jean-Francois, 1986. "On the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 54(5), pages 1003-37, September.
  29. 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.
  30. 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.
  31. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  32. 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.
  33. 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.
  34. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October.
  35. 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.
  36. 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.
  37. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
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