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The Taxation of Trades in assets

  • CITANNA, Alessandro
  • POLEMARCHAKIS, Heracles M.

    (Brown University, Providence)


    (Université Catholique de Louvain)

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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Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 721.

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Length: 19 pages
Date of creation: 01 Dec 2000
Date of revision:
Handle: RePEc:ebg:heccah:0721
Contact details of provider: Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
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  1. Alan J. Auerbach, 1982. "The Theory of Excess Burden and Optimal Taxation," NBER Working Papers 1025, National Bureau of Economic Research, Inc.
  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. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-92, May.
  4. 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.
  5. Dow, J. & Rahi, R., 1997. "Should Speculators be Taxed?," Economics Working Papers eco97/21, European University Institute.
  6. James Tobin, 1978. "A Proposal for International Monetary Reform," Cowles Foundation Discussion Papers 506, Cowles Foundation for Research in Economics, Yale University.
  7. 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.
  8. Bisin, A. & Geanakoplos, J.D. & Gottardi, P. & Minelli, E. & Polemarchakis, H., 2011. "Markets and contracts," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 279-288.
  9. Guesnerie, Roger, 1977. "On the direction of tax reform," Journal of Public Economics, Elsevier, vol. 7(2), pages 179-202, April.
  10. Tirelli, Mario, 2002. "Income Taxation when Markets are Incomplete," MPRA Paper 746, University Library of Munich, Germany.
  11. 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.
  12. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
  13. David Cass & Alessandro Citanna, 1998. "Pareto Improving Financial Innovation in Incomplete Markets," Post-Print hal-00479286, HAL.
  14. 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).
  15. 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.
  16. Guesnerie, Roger, 1979. "General statements on second best pareto optimality," Journal of Mathematical Economics, Elsevier, vol. 6(2), pages 169-194, July.
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