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The Taxation of Trades in assets

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  • CITANNA, Alessandro
  • POLEMARCHAKIS, Heracles M.

    (Brown University, Providence)

  • TIRELLI, M.

    (Université Catholique de Louvain)

Abstract

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.

Suggested Citation

  • CITANNA, Alessandro & POLEMARCHAKIS, Heracles M. & TIRELLI, M., 2000. "The Taxation of Trades in assets," HEC Research Papers Series 721, HEC Paris.
    • Handle: RePEc:ebg:heccah:0721
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    References listed on IDEAS

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    Cited by:

    1. Elena L. Mercato & Vincenzo Platino, 2017. "On the regularity of smooth production economies with externalities: competitive equilibrium à la Nash," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(1), pages 287-307, January.
    2. Cipriani, Marco & Guarino, Antonio & Uthemann, Andreas, 2022. "Financial transaction taxes and the informational efficiency of financial markets: A structural estimation," Journal of Financial Economics, Elsevier, vol. 146(3), pages 1044-1072.
    3. P. Jean-Jacques Herings & Herakles Polemarchakis, 2006. "Pareto Improving Price Regulation when the Asset Market is Incomplete," Studies in Economic Theory, in: Christian Schultz & Karl Vind (ed.), Institutions, Equilibria and Efficiency, chapter 12, pages 225-244, Springer.
    4. Jean-Marc Bonnisseau & Elena Mercato, 2010. "Externalities, consumption constraints and regular economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(1), pages 123-147, July.
    5. Sergio Turner, 2004. "Pareto Improving Taxation in Incomplete Markets," Econometric Society 2004 North American Summer Meetings 614, Econometric Society.
    6. Geanakoplos, John & Polemarchakis, H.M., 2008. "Pareto improving taxes," Journal of Mathematical Economics, Elsevier, vol. 44(7-8), pages 682-696, July.
    7. Sergio Turner, 2006. "Theory of Demand in Incomplete Markets," Working Papers 2006-07, Brown University, Department of Economics.
    8. ,, 2007. "Two-fund separation in dynamic general equilibrium," Theoretical Economics, Econometric Society, vol. 2(2), June.
    9. Mendolicchio, C. & Pietra, T., 2016. "Endowment redistribution and Pareto improvements in GEI economies," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 181-190.
    10. Carvajal, Andrés & Polemarchakis, Herakles, 2011. "Idiosyncratic risk and financial policy," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1569-1597, July.
    11. Mario Tirelli, 2003. "Income taxation when markets are incomplete," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 26(2), pages 97-128, November.
    12. Elena Mercato & Antonio Villanacci, 2006. "Taxes and money in incomplete financial markets," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 29(1), pages 23-54, May.
    13. Matthew Hoelle, 2012. "Transaction costs and planner intervention," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(3), pages 603-634, August.
    14. Carvajal, Andres & Polemarchakis, H.M., 2008. "Identification of Pareto-improving policies: Information as the real invisible hand," Journal of Mathematical Economics, Elsevier, vol. 44(2), pages 167-179, January.
    15. Burak Unveren, 2017. "Stability and Taxation in Monopolistic Competition," Economics Bulletin, AccessEcon, vol. 37(4), pages 2315-2323.
    16. 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.
    17. Sergio Turner & Norovsambuu Tumennasan, 2006. "Pareto Improving Monetary Policy in Incomplete Markets," Working Papers 2006-04, Brown University, Department of Economics.
    18. Tirelli Mario & Turner Sergio, 2010. "Quantifying the Cost of Risk in Consumption," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-33, July.

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    More about this item

    Keywords

    taxes; incomplete asset market; equilibrium; pareto; improvement;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D60 - Microeconomics - - Welfare Economics - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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