Optimal Redistributive Taxation in Credit Markets with Adverse Selection

Anastasios Dosis (1)

1 ESSEC Business School

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

Domains: Humanities and Social Sciences; Business administration

Anastasios Dosis. Optimal Redistributive Taxation in Credit Markets with Adverse Selection. 2019. ⟨hal-02130458⟩