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EnglishThis paper describes financial systemic risk as a pollution issue. Free riding leads to excess risk production. This problem may be solved, at least partially, either with financial regulation or with taxation. From a normative viewpoint taxation is superior in many respects. However, reality shows that financial regulation is adopted more frequently. This paper makes a positive, politico-economic argument. If the majority chooses regulation, the level will possibly be too harsh. If it chooses a tax, then the level is likely to be too low. Due to regressive effects, a tax on financial transactions receives low support from a majority of low polluting portfolio owners. The same kind of majority may strategically choose regulation in order to charge the minority a larger share of the cost of reducing systemic risk
| Titolo: | Financial System Risk: Taxation or Regulation?, Journal of Banking and Finance |
| Autori: | |
| Data di pubblicazione: | 2013 |
| Rivista: | |
| Abstract: | This paper describes financial systemic risk as a pollution issue. Free riding leads to excess risk production. This problem may be solved, at least partially, either with financial regulation or with taxation. From a normative viewpoint taxation is superior in many respects. However, reality shows that financial regulation is adopted more frequently. This paper makes a positive, politico-economic argument. If the majority chooses regulation, the level will possibly be too harsh. If it chooses a tax, then the level is likely to be too low. Due to regressive effects, a tax on financial transactions receives low support from a majority of low polluting portfolio owners. The same kind of majority may strategically choose regulation in order to charge the minority a larger share of the cost of reducing systemic risk |
| Handle: | http://hdl.handle.net/11575/13378 |
| Appare nelle tipologie: | 1.1 Articolo in rivista |
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