This paper analyzes the effects of taxation on information acquisition and bilateral trade in decentralized markets. We show that a profit tax and a transaction tax have opposite implications for equilibrium outcome in bargaining. A marginal increase of a transaction tax increases the incentive...

We study whether output responds symmetrically to tax increases and decreases in postwar US data, using the identification strategy in Romer and Romer (2010). We find evidence of important asymmetries: the output response to a tax increase is statistically insignificant, but output shows a...