The signaling effect of tax policy

Barigozzi, Francesca; Villeneuve, Bertrand

Barigozzi, Francesca; Villeneuve, Bertrand (2006), The signaling effect of tax policy, Journal of public economic theory, 8, 4, p. 611-630. http://dx.doi.org/10.1111/j.1467-9779.2006.00281.x

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Type

Article accepté pour publication ou publié

Date

2006

Journal name

Journal of public economic theory

Volume

Number

Publisher

Wiley

Pages

611-630

Abstract (EN)

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.

Subjects / Keywords

tax policy; marginal cost of public funds; information bias; signaling

JEL

H20 - General
D82 - Asymmetric and Private Information; Mechanism Design
H30 - General
I18 - Government Policy; Regulation; Public Health