We describe financial systemic risk as a pollution issue. This problem may be tackled either with financial regulation or taxation. From a normative viewpoint taxation is superior in many respects. From a positive, politico economic viewpoint things are different. The policy instrument is chosen by majority voting. If the majority chooses a tax, then it is likely to be too low. If it chooses regulation it will possibly be too harsh. Moreover, a majority of low polluting portfolio owners may have a strategic incentive to use regulation. We discuss this theoretical result in the light of the current political debate. We argue that a possible financial transaction tax, if adopted, is likely to be too low.[...]
Financial Systemic Risk, Regulation and Taxation: The Economic and Political Dimensions
PASSARELLI, Francesco
2012-01-01
Abstract
We describe financial systemic risk as a pollution issue. This problem may be tackled either with financial regulation or taxation. From a normative viewpoint taxation is superior in many respects. From a positive, politico economic viewpoint things are different. The policy instrument is chosen by majority voting. If the majority chooses a tax, then it is likely to be too low. If it chooses regulation it will possibly be too harsh. Moreover, a majority of low polluting portfolio owners may have a strategic incentive to use regulation. We discuss this theoretical result in the light of the current political debate. We argue that a possible financial transaction tax, if adopted, is likely to be too low.[...]I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
