Working Paper: NBER ID: w1304
Authors: Bruce Greenwald; Joseph E. Stiglitz
Abstract: This paper presents a simple but quite general framework for analyzing the impact of informational externalities. By identifying the traditional pecuniary effect of these externalities which nets out,the paper greatly simplifies the problem of determining when tax interventions can be Pareto improving. In some cases it also leads to simple tests, based on readily observable indicators of the efficacy of a particular tax policy. The framework of the paper is used to analyze adverse selection, signalling, moral hazard, incomplete contingent claim markets and queue rationing equilibria.
Keywords: informational externalities; market efficiency; welfare economics; government intervention
JEL Codes: D62; D82; H21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax interventions (H26) | Pareto improvements (D61) |
| Informational asymmetries (D82) | Tax interventions (H26) |
| Adverse selection (D82) | Tax interventions (H26) |
| Moral hazard (G52) | Tax interventions (H26) |
| Tax policies (H29) | Market efficiency (G14) |
| Tax policies (H29) | Correct inefficiencies (D61) |