Markets as beneficial constraints on the government

Published

Journal Article

We study the role of anonymous markets in which trades cannot be monitored by the government. We adopt a Mirrlees approach to analyze economies in which agents have private information and a benevolent government controls optimal redistributive tax policy. While unrestricted access to anonymous markets reduces the set of policy instruments available to the government, it also limits the scope of inefficient redistributive policies when the government lacks commitment. Indeed, the restrictions that anonymous markets impose on the optimal fiscal policy, especially on capital taxation and the history-dependence of income taxation, can have positive welfare effects in this case. © 2005 Elsevier B.V. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • Bisin, A; Rampini, AA

Published Date

  • May 1, 2006

Published In

Volume / Issue

  • 90 / 4-5

Start / End Page

  • 601 - 629

International Standard Serial Number (ISSN)

  • 0047-2727

Digital Object Identifier (DOI)

  • 10.1016/j.jpubeco.2005.04.003

Citation Source

  • Scopus