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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. Oh, Seonghwan & Waldman, Michael, 1990. "The Macroeconomic Effects of False Announcements," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 1017-34, November.
  2. Richard J. Arnott & Joseph E. Stiglitz, 1988. "Randomization with Asymmetric Information," NBER Working Papers 2507, National Bureau of Economic Research, Inc.
  3. Manuel Amador & Pierre Olivier Weill, 2008. "Learning from Prices: Public Communication and Welfare," 2008 Meeting Papers 390, Society for Economic Dynamics.
  4. Maria Demertzis & Andrew Hughes Hallet, 2003. "Central Bank Transparency in Theory and Practice," DNB Staff Reports (discontinued) 105, Netherlands Central Bank.
  5. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  6. Susan Athey & Andrew Atkeson & Patrick J. Kehoe, 2004. "The optimal degree of discretion in monetary policy," Staff Report 326, Federal Reserve Bank of Minneapolis.
  7. 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.
  8. Petra M. Geraats, 2009. "Trends in Monetary Policy Transparency," International Finance, Wiley Blackwell, vol. 12(2), pages 235-268, 08.
  9. Farrell, Joseph, 1986. "Meaning and Credibility in Cheap-Talk Games," Department of Economics, Working Paper Series qt4968n3fz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  10. Faust, Jon & Svensson, Lars E O, 2002. "The Equilibrium Degree of Transparency and Control in Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 520-39, May.
  11. F. Barigozzi & B. Villeneuve, 2004. "The signaling effect of tax policy," Working Papers 500, Dipartimento Scienze Economiche, Universita' di Bologna.
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  13. André Sapir & Xavier Debrun, 2010. "Government Size and Output Volatility: Should We Forsake Automatic Stabilization ?," ULB Institutional Repository 2013/174323, ULB -- Universite Libre de Bruxelles.
  14. Stephen Morris & Jeffery D. Amato & Hyun Song Shin, 2004. "Communication and Monetary Policy," Yale School of Management Working Papers ysm345, Yale School of Management.
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  16. repec:rje:randje:v:37:y:2006:1:p:155-175 is not listed on IDEAS
  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. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  19. 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.
  20. Alessandro Pavan & George-Marios Angeletos, 2008. "Policy with Dispersed Information," 2008 Meeting Papers 1103, Society for Economic Dynamics.
  21. repec:bla:restud:v:76:y:2009:i:3:p:1023-1048 is not listed on IDEAS
  22. Alessandro Gavazza & Alessandro Lizzeri, 2009. "Transparency and Economic Policy," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 1023-1048.
  23. Stephen Morris, 1999. "Political Correctness," Cowles Foundation Discussion Papers 1242, Cowles Foundation for Research in Economics, Yale University.
  24. 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.
  25. Christopher Sleet, 2004. "Optimal Taxation with Private Government Information," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1217-1239, October.
  26. 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.
  27. 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," DNB Working Papers 170, Netherlands Central Bank, Research Department.
  28. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  29. Cho, In-Koo, 1987. "A Refinement of Sequential Equilibrium," Econometrica, Econometric Society, vol. 55(6), pages 1367-89, November.
  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. 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.
  32. Sleet, Christopher, 2001. "On Credible Monetary Policy and Private Government Information," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 338-376, July.
  33. Joan Esteban & Debraj Ray, 2006. "Inequality, Lobbying, and Resource Allocation," American Economic Review, American Economic Association, vol. 96(1), pages 257-279, March.
  34. 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.
  35. 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.
  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. 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.
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