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The Societal Benefits of a Financial Transaction Tax

Research Project
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01.10.2014
 - 30.11.2027

We investigate the positive and normative implications of a tax on financial market transactions in a dynamic general equilibrium model, where agents face idiosyncratic liquidity shocks and financial trading is essential. Our main finding is that agents' portfolio choices display a pecuniary externality which results in too much trading. We calibrate the model to U.S. data and find an optimal tax rate of 2.5 percent. Imposing this tax reduces trading in financial markets by 30 percent

Collaborations & Cooperations

2015 - Participation or Organization of Collaborations within own University
Huber, Samuel, University of Basel, Research cooperation
2015 - Participation or Organization of Collaborations on an international level
Marchesiani, Alessandro, University of Bath, Research cooperation

Publications

Berentsen, Aleksander, Huber, Samuel and Marchesiani, Alessandro (2016) ‘The societal benefits of a financial transaction tax’, European Economic Review, 89, pp. 303–323. Available at: https://doi.org/10.1016/j.euroecorev.2016.08.003.

URLs
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Members (3)

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Aleksander Berentsen

Principal Investigator
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Alessandro Marchesiani

Project Member
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Samuel Huber

Project Member