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The signaling effect of tax policy

  • F. Barigozzi
  • B. Villeneuve

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. Copyright 2006 Blackwell Publishing, Inc..

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 500.

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Date of creation: 2004
Date of revision:
Handle: RePEc:bol:bodewp:500
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  1. F. Barigozzi & B. Villeneuve, 2001. "Influencing the Misinformed Misbehaver: An Analysis of Public Policy towards Uncertainty and External Effects," Working Papers 404, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Brown, Gardner & Layton, David F., 1996. "Resistance economics: social cost and the evolution of antibiotic resistance," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 349-355, July.
  3. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-48, July.
  4. Olsen, Trond E. & Osmundsen, Petter, 2001. "Strategic tax competition; implications of national ownership," Journal of Public Economics, Elsevier, vol. 81(2), pages 253-277, August.
  5. Aaron S. Edlin & Pinar Karaca-Mandic, 2006. "The Accident Externality from Driving," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 931-955, October.
  6. Charles L. Ballard & Don Fullerton, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 117-131, Summer.
  7. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer, vol. 2(2), pages 157-183, August.
  8. Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, vol. 55(6), pages 1349-65, November.
  9. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
  10. Manelli, Alejandro M, 1996. "Cheap Talk and Sequential Equilibria in Signaling Games," Econometrica, Econometric Society, vol. 64(4), pages 917-42, July.
  11. Hanson, Robin, 2003. "Warning labels as cheap-talk: why regulators ban drugs," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2013-2029, September.
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