Government Information Transparency∗

This paper studies a model of announcements by a privately in-formed government about the future state of economic activity in an economy subject to recurrent shocks and with distortions due to in-come taxation chosen by majority voting. Although transparent com-munication would ex-ante be desirable, we find that even a benevo-lent government may decide to be non-informative in an attempt to countervail the tax distortion in a second-best type of policy. In a politico-economic (Nash) equilibrium, transparency critically depends on inequality, which influences both tax and information distortions. Such influence in turn depends on labor supply elasticity. Our re-sults provide a rationale for independent national statistical offices, committed to truthful communication