 Financial systemic risk: Taxation or regulation?Donato Masciandaro () and Francesco Passarelli Journal of Banking & Finance, 2013, vol. 37, issue 2, 587-596 Abstract: This paper describes financial systemic risk as a pollution issue. Free riding leads to excess risk production. This problem may be solved, at least partially, either by financial regulation or by taxation. From a normative viewpoint, taxation is superior in many respects. However, reality shows that financial regulation is adopted more frequently. This paper makes a positive, politico-economic argument. If the majority chooses regulation, the level is likely to be too harsh. If it chooses taxation, then the level is likely to be too low. Due to regressive effects, a tax on financial transactions receives low support from a majority of low polluting portfolio owners. The same kind of majority may strategically choose regulation in order to burden the minority with a larger share of the cost of reducing systemic risk. Keywords: Financial crisis; Systemic risk; Banking regulation; Financial transaction taxes; Political economy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:2:p:587-596 DOI: 10.1016/j.jbankfin.2012.09.020 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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