Optimal Redistributive Taxation in Credit Markets with Adverse Selection

Anastasios Dosis

No WP1906, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: I study optimal redistributive taxation in credit markets with adverse selection. Under symmetric information, the tax system is non-distortionary and unambiguously benefits high-risk types at the expense of low-risk types. Under asymmetric information, a range of taxes exists that creates Pareto improvements relative to the (zero-tax) market allocation by increasing aggregate investment. For sufficiently high taxes, an increase in the safe interest rate can be accompanied by an increase in investment.

Keywords: Credit market; Adverse selection; Taxation; Redistribution; Welfare (search for similar items in EconPapers)
JEL-codes: D82 D86 H25 H82 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2019-04
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Working Paper: Optimal Redistributive Taxation in Credit Markets with Adverse Selection (2019)
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