European Business Schools Librarian's Group

ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School

No WP1906: Optimal Redistributive Taxation in Credit Markets with Adverse Selection

Dosis Anastasios ()
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Dosis Anastasios: ESSEC Research Center, ESSEC Business School, Postal: ESSEC Research Center, BP 105, 95021 Cergy, France

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

JEL-codes: D82; D86; H25; H82

16 pages, April 2019

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