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The Signaling Effect of Tax Policy
Author(s) -
BARIGOZZI FRANCESCA,
VILLENEUVE BERTRAND
Publication year - 2006
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2006.00281.x
Subject(s) - credibility , economics , government (linguistics) , distortion (music) , consumption (sociology) , public economics , value (mathematics) , tax policy , microeconomics , tax reform , monetary economics , amplifier , social science , philosophy , linguistics , cmos , electronic engineering , machine learning , sociology , political science , computer science , law , engineering
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.