Tax on name
Yibo Sun and
Bo Wang
Economics Letters, 2020, vol. 190, issue C
Abstract:
How to tax the name? We answer this question by introducing a name market in the sense of Tadelis (1999) into an endogenous growth model in which an informational asymmetry exists between capital producing borrowers and lenders. We show a name market endogenously arises to screen the borrowers but at the cost of crowding out investment. We derive the optimal name price that trades off the screening effect and the crowding out effect and show this optimal price decreases with the investor protection level. An optimal tax scheme should tax the name to this optimal price and reimburse the tax revenue to the name buyer. When the investor protection level is low, the net worth could be lower than the optimal name price, so capital income tax shall be allowed to subsidy the name purchase to activate the name market. Overall, we show the optimal tax scheme in the presence of a name market depends crucially on the country’s investor protection level.
Keywords: Asymmetric information; Name market; Reimbursement tax (search for similar items in EconPapers)
JEL-codes: E6 G3 O3 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176520300811
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:190:y:2020:i:c:s0165176520300811
DOI: 10.1016/j.econlet.2020.109089
Access Statistics for this article
Economics Letters is currently edited by Economics Letters Editorial Office
More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().