Market distortions and government transparency

Albornoz, Facundo; Esteban, Joan; Vanin, Paolo

Abstract

In this paper, we investigate how government transparency depends on economic distortions. We first consider an abstract class of economies in which a benevolent policy maker is privately informed about the exogenous state of the economy and contemplates whether to release this information. Our key result is that distortions limit communication: even if transparency is ex ante Pareto superior to opaqueness, it cannot constitute an equilibrium when distortions are sufficiently high. We next confirm this broad insight in two applied contexts, in which monopoly power and income taxes are the specific sources of distortions. (JEL: D82, E61)

Citation

Albornoz, F., Esteban, J., & Vanin, P. (2014). Market distortions and government transparency. Journal of European Economic Association, 12(1), https://doi.org/10.1111/jeea.12052

• Journal Article Type: Article
• Acceptance Date: May 1, 2013
• Online Publication Date: Jan 15, 2014
• Publication Date: Feb 1, 2014
• Deposit Date: Aug 22, 2016
• Publicly Available Date: Aug 22, 2016
• Journal: Journal of the European Economic Association
• Electronic ISSN: 1542-4766
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• Volume: 12
• Issue: 1
• DOI: https://doi.org/10.1111/jeea.12052
• Public URL: https://nottingham-repository.worktribe.com/output/720607
• Publisher URL: http://onlinelibrary.wiley.com/doi/10.1111/jeea.12052/abstract
• Contract Date: Aug 22, 2016