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 by financial regulation or by taxation. From anormative 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 is likely to be too harsh. If it chooses taxation, then the level is likely to be too low. Due to regressive effects, a tax on financial transactions receives low support from a majority oflow polluting portfolio owners. The same kind of majority may strategically choose regulation in order toburden the minority with a larger share of the cost of reducing systemic risk.[...]

Financial systemic risk: Taxation or regulation?

PASSARELLI, Francesco
2013

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 by financial regulation or by taxation. From anormative 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 is likely to be too harsh. If it chooses taxation, then the level is likely to be too low. Due to regressive effects, a tax on financial transactions receives low support from a majority oflow polluting portfolio owners. The same kind of majority may strategically choose regulation in order toburden the minority with a larger share of the cost of reducing systemic risk.[...]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11575/4080
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