Verlag:
Faculty of Economics and Statistics, University of Innsbruck, Innsbruck, Austria
This paper shows that a transaction tax makes trades in decentralized markets more information sensitive and enlarges the range of information costs for which the equilibrium exhibits private information acquisition and endogenous adverse selection....
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ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
Signatur:
DS 395
Fernleihe:
keine Fernleihe
This paper shows that a transaction tax makes trades in decentralized markets more information sensitive and enlarges the range of information costs for which the equilibrium exhibits private information acquisition and endogenous adverse selection. A transaction tax reduces the probability of trade. The opposite implications hold for a tax on capital gains. The theoretical implications of a transaction tax are tested using a tax policy change in one segment of Singapore's housing market. Using various proxies for information sensitivity, the triple difference-in-difference analysis shows that a higher transaction tax reduces turnover more strongly when trades are more information sensitive.