Should speculators be taxed?

Dow, James and Rahi, Rohit ORCID: 0000-0001-6887-9160 (1998) Should speculators be taxed? Financial Markets Group Discussion Papers (291). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

A number of economists have supported the taxation of speculation in financial markets. We examine the welfare economics of such a tax in a model of trading in a financial market where some agents have superior information. We show that in some cases a tax on speculators may actually increase speculative profits. This occurs if the speculators' benefit from less informative prices offsets the costs of the tax. The effect on the welfare of other agents depends on how revelation of information changes risk-sharing opportunities in the market. It is possible for the introduction of a tax to cause a Pareto improvement.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 1998 The Author(s)
Divisions:	Finance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G10 - General D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations; Speculations
Date Deposited:	30 Jun 2023 23:04
Last Modified:	01 Apr 2024 08:00
URI:	http://eprints.lse.ac.uk/id/eprint/119150

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