Abstract
We analyze a model with incomplete financial markets, where money is needed to pay taxes. Equilibria exist, are typically regular and not Pareto optimal. Moreover, generically, there exists a redistribution of money among households which leads to a Pareto superior equilibrium. The intervention occurs only in the first period and it does not require either closing markets or upper bounds on the number of households.
Mathematics Subject Classification (2000): 91B50
Journal of Economic Literature Classification: D52, D60, E50, H20
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del Mercato, E.L., Villanacci, A. Taxes and money in incomplete financial markets. Decisions Econ Finan 29, 23–54 (2006). https://doi.org/10.1007/s10203-006-0058-0
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DOI: https://doi.org/10.1007/s10203-006-0058-0