Optimal taxation in asset markets with adverse selection / by Seyed Mohammadreza Davoodalhosseini. : FB3-5/2020-11E-PDF

"Constrained efficiency is characterized in an asset market, subject to search frictions, where sellers are privately informed about the type of their asset. The type determines the opportunity cost of the asset for sellers and the quality of the asset for buyers. The constrained efficient allocation can be implemented using a sales tax schedule. The role of these taxes is to redistribute resources between different types of sellers to relax incentive constraints. The optimal tax schedule strictly increases welfare compared with the laissez-faire equilibrium, can sometimes lead to an allocation that Pareto dominates the equilibrium, and can sometimes lead to the first-best allocation (i.e., taxation can correct all inefficiencies caused by adverse selection). The shape of the optimal tax schedule is also investigated. If the quality of assets for buyers is a monotonic function of the sellers' opportunity cost (e.g., more distressed sellers have lower-quality assets), the schedule requires that the trading of low-quality assets be subsidized and trading of high-quality assets be taxed, although the schedule is not necessarily monotone in the quality or price of the assets. Otherwise, trading of some low-quality assets may be taxed and trading of some high-quality assets may be subsidized"--Abstract, page iii.

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Renseignements sur la publication
Ministère/Organisme Bank of Canada.
Titre Optimal taxation in asset markets with adverse selection / by Seyed Mohammadreza Davoodalhosseini.
Titre de la série Staff working paper = Document de travail du personnel, 1701-9397 ; 2020-11
Type de publication Série - Voir l'enregistrement principal
Langue [Anglais]
Format Électronique
Document électronique
Note(s) "Last updated: April 3, 2020."
Includes bibliographical references (pages 30-31).
Information sur la publication Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2020.
©2020
Auteur / Contributeur Davoodalhosseini, S. Mohammad R., author.
Description 1 online resource (iii, 31, 16 pages) : colour illustrations.
Numéro de catalogue
  • FB3-5/2020-11E-PDF
Descripteurs Efficient market theory -- Econometric models.
Sales tax -- Econometric models.
Hypothèse du marché efficient -- Modèles économétriques.
Tax de vente -- Modèles économétriques.
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