Speculation and Tobin taxes: Why sand in the wheels can increase economic efficiency
- Thomas I. Palley
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The current paper develops the microeconomic case for a Tobin tax. It combines the noise-trader literature with the Tobin-tax-policy literature. Noise traders cause economic losses by inappropriately cashing out their investments. A Tobin tax can reduce such activity, thereby conferring a benefit on fundamentals investors. The paper identifies the conditions under which these gains would be largest and provides guidelines as to whether a tax is warranted. There is a trade-off because Tobin taxes discourage fundamentals investors from trading, and there are occasions when they would rationally choose to trade but do not because of the tax.
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- Speculation and Tobin taxes: Why sand in the wheels can increase economic efficiency
Journal of Economics
Volume 69, Issue 2 , pp 113-126
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- noise traders
- fundamentals investors
- Tobin taxes
- Industry Sectors
- Thomas I. Palley (1)
- Author Affiliations
- 1. Public Policy, AFL-CIO, 815 Sixteenth Street NW, 20006, Washington, DC, USA