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Credit market efficiency and tax policy in the presence of screening costs

de Meza, David and Webb, David C. (1988) Credit market efficiency and tax policy in the presence of screening costs. Journal of Public Economics, 36 (1). pp. 1-22. ISSN 0047-2727

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Identification Number: 10.1016/0047-2727(88)90020-5


After establishing the existence of capital market equilibrium in the presence of asymmetric information and screening costs, this paper examines tax policies designed to correct the attendant externalities. When projects differ in expected returns it is shown to be ambiguous whether costly private screening weakens or strengthens the case for an interest income tax. However, when projects differ only in riskiness, as in the model of Stiglitz and Weiss, screening opportunities cause the efficiency case for tax intervention to disappear.

Item Type: Article
Additional Information: © 1988 Elsevier Science B.V.
Divisions: Management
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Management
Collections > Economists Online
Date Deposited: 06 May 2011 11:07
Last Modified: 20 Nov 2019 06:09

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