The Signaling Effect of Tax Policy

Francesca Barigozzi and Bertrand Villeneuve

Journal of Public Economic Theory, 2006, vol. 8, issue 4, 611-630

Abstract: 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.

Date: 2006
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https://doi.org/10.1111/j.1467-9779.2006.00281.x

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Working Paper: The signaling effect of tax policy (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:8:y:2006:i:4:p:611-630

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