Government as a Discriminating Monopolist in the Financial Market: The Case of China

37 Pages Posted: 6 Sep 2001

See all articles by Roger H. Gordon

Roger H. Gordon

University of California, San Diego (UCSD) - Department of Economics; Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Wei Li

University of Virginia - Darden School of Business; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 2001

Abstract

We show that the many unusual features of China's financial markets are consistent with a government choosing regulations to maximize a standard type of social welfare function. Under certain conditions, these regulations are equivalent to imposing explicit taxes on business and interest income, yet should be much easier to enforce. The observed implicit tax rates are broadly inline with those observed in other countries. The theory also forecasts, however, that China will face increasing incentives over time to shift to explicit taxes.

Suggested Citation

Gordon, Roger H. and Li, Wei, Government as a Discriminating Monopolist in the Financial Market: The Case of China (June 2001). Available at SSRN: https://ssrn.com/abstract=282533 or http://dx.doi.org/10.2139/ssrn.282533

Roger H. Gordon

University of California, San Diego (UCSD) - Department of Economics ( email )

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Harvard University - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Wei Li (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
804-243-7691 (Phone)
804-243-7681 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/li.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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