| . |
Louis Kaplow's
Scholarly Papers
Click on the title of any column to sort the table by that
column. |
|
|
| |
|
|
Aggregate Statistics |
|
Total Downloads
14,540 |
Total
Citations
721 |
|
|
|
|
|
1.
|
|
Economic Analysis of Law
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
|
Posted:
|
|
02 Mar 99
|
|
Last Revised:
|
|
10 Jun 07
|
|
2,172 ( 1,275) |
26
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
25 May 06
|
|
Last Revised:
|
|
10 Jun 07
|
|
65
|
26
|
|
| |
Abstract:
This is a survey of the field of economic analysis of law, focusing on the work of economists. The survey covers the three central areas of civil law liability for accidents (tort law), property law, and contracts as well as the litigation process and public enforcement of law.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
02 Mar 99
|
|
Last Revised:
|
|
28 Jan 00
|
|
2,107
|
26
|
|
| |
Abstract:
This is a survey of the field of economic analysis of law, focusing on the work of economists. The survey covers the three central areas of civil law - liability for accidents (tort law), property law, and contracts - as well as the litigation process and public enforcement of law.
|
|
|
|
|
|
2.
|
|
Antitrust
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School Carl Shapiro University of California, Berkeley - Economic Analysis & Policy Group
|
|
Posted:
|
|
31 Jan 07
|
|
Last Revised:
|
|
08 Jun 07
|
|
1,314 ( 3,256) |
19
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Carl Shapiro University of California, Berkeley - Economic Analysis & Policy Group
|
| Posted: |
|
06 Feb 07
|
|
Last Revised:
|
|
06 Feb 07
|
|
1,269
|
19
|
|
| |
Abstract:
This is a survey of the economic principles that underlie antitrust law and how those principles relate to competition policy. We address four core subject areas: market power, collusion, mergers between competitors, and monopolization. In each area, we select the most relevant portions of current economic knowledge and use that knowledge to critically assess central features of antitrust policy. Our objective is to foster the improvement of legal regimes and also to identify topics where further analytical and empirical exploration would be useful.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Carl Shapiro University of California, Berkeley - Economic Analysis & Policy Group
|
| Posted: |
|
31 Jan 07
|
|
Last Revised:
|
|
08 Jun 07
|
|
45
|
19
|
|
| |
Abstract:
This is a survey of the economic principles that underlie antitrust law and how those principles relate to competition policy. We address four core subject areas: market power, collusion, mergers between competitors, and monopolization. In each area, we select the most relevant portions of current economic knowledge and use that knowledge to critically assess central features of antitrust policy. Our objective is to foster the improvement of legal regimes and also to identify topics where further analytical and empirical exploration would be useful.
|
|
|
|
|
|
3.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
23 May 00
|
|
Last Revised:
|
|
25 May 00
|
|
993 (5,302)
|
30
|
|
| |
Abstract:
Our thesis is that the assessment of a legal policy should depend exclusively on its effects on human welfare, that is, on the well-being of individuals. In particular, no independent evaluative weight should be accorded to notions of fairness, such as corrective justice in tort and desert in punishment. (Concerns about the distribution of income are not, however, subject to our critique.) When the choice of legal rules is influenced by notions of fairness, individuals are often made worse off. Indeed, if the prescriptions of any notion of fairness are followed, it is always possible that everyone will be made worse off. Moreover, when we examine notions of fairness and the literature that advances them, we are unable to identify reasons that, on reflection, justify giving weight to these notions at the expense of individuals' well-being. Nevertheless, notions of fairness are widely felt to be appealing. We suggest that this appeal can largely be explained by three factors: notions of fairness often correspond to social norms that usefully regulate everyday life; notions of fairness may serve as proxy devices for achieving instrumental objectives; and individuals may have a taste for satisfaction of the notions. However, we explain that none of these factors warrants employing notions of fairness as independent evaluative principles in the assessment of legal policy. We develop these arguments through consideration of specific conceptions of fairness that are employed in major areas of law: tort, contract, legal procedure, and law enforcement. We also discuss the implications of our analysis for our primary audience, legal academics and other legal policy analysts, and also for government officials, notably legislators, regulators, and judges.
|
|
|
4.
|
|
Property Rules versus Liability Rules
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
|
Posted:
|
|
01 Feb 98
|
|
Last Revised:
|
|
19 Jun 98
|
|
894 ( 6,364) |
26
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
06 Feb 98
|
|
Last Revised:
|
|
19 Jun 98
|
|
0
|
|
|
| |
Abstract:
Should property rights be protected absolutely -- by property rules -- or instead by the requirement that infringing parties pay for harm done--that is, by liability rules? In this article, we present a systematic economic analysis of this fundamental question. Our primary object is to explain why liability rules are often employed to protect individuals against harmful externalities (such as pollution and automobile accidents), whereas property rules are generally relied upon to protect individuals from having their possessions taken from them, thereby ensuring a basic incident of ownership. In the course of our analysis, we suggest that a variety of commonly held beliefs about property and liability rules are in error, and we also derive results bearing on legal policy. Notably, we show that, for controlling some important externalities, liability rules (and pollution taxes) are superior to property rules (including many forms of regulation) even when damages must be set using only limited information about harm.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
01 Feb 98
|
|
Last Revised:
|
|
19 Jun 98
|
|
894
|
26
|
|
| |
Abstract:
A fundamental legal problem is whether property rights should be protected by property rules or by liability rules. In this Article, we provide a systematic economic analysis of the choice between property and liability rules. We answer a basic question: why is it that liability rules are commonly used in the context of harmful externalities (such as pollution and automobile accidents), whereas property rules are generally employed to protect possessors of things against potential takers? In the course of our analysis, we demonstrate that many commonly held beliefs about property and liability rules are mistaken. Our analysis is also relevant to policy; for example, we show that in important contexts liability rules (and pollution taxes) are more efficient than property rules (including much regulation) even when damages must be set using only limited information about harm.
|
|
|
|
|
|
5.
|
|
The Conflict Between Notions of Fairness and the Pareto Principle
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
|
Posted:
|
|
29 Sep 99
|
|
Last Revised:
|
|
26 Mar 01
|
|
872 ( 6,631) |
13
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
18 Feb 00
|
|
Last Revised:
|
|
26 Mar 01
|
|
731
|
13
|
|
| |
Abstract:
Most legal academics and policymakers believe that notions of fairness should be accorded positive weight in evaluating legal policies. We explain, however, that ascribing importance to any notion of fairness (other than one concerned solely with the distribution of income) will sometimes lead to a conflict with the Pareto principle. That is, to endorse a notion of fairness is to endorse the view that it can be desirable to adopt a legal rule that will reduce the well-being of every person in society.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
29 Sep 99
|
|
Last Revised:
|
|
29 Jun 00
|
|
141
|
13
|
|
| |
Abstract:
Most legal academics and policymakers believe that notions of fairness should be accorded positive weight in evaluating legal policies. We explain, however, that ascribing importance to any notion of fairness (other than one concerned solely with the distribution of income) will sometimes lead to a conflict with the Pareto principle. That is, to endorse a notion of fairness is to endorse the view that it can be desirable to adopt a legal rule that will reduce the well-being of every person in society.
|
|
|
|
|
|
6.
|
|
Fairness Versus Welfare: Notes on the Pareto Principle, Preferences, and Distributive Justice
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
|
Posted:
|
|
27 Mar 03
|
|
Last Revised:
|
|
18 Apr 03
|
|
608 ( 11,371) |
30
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
11 Apr 03
|
|
Last Revised:
|
|
11 Apr 03
|
|
44
|
30
|
|
| |
Abstract:
In Fairness versus Welfare, we advance the thesis that social policies should be assessed based entirely on their effects on individuals' well-being. This thesis implies that no independent weight should be accorded to notions of fairness (other than many purely distributive notions). We support our thesis in three ways: by demonstrating how notions of fairness perversely reduce welfare, indeed, sometimes everyone's well-being; by revealing numerous other deficiencies in the notions, including their lack of sound rationales; and by providing an account of notions of fairness that explains their intuitive appeal in a manner that reinforces the conclusion that they should not be treated as independent principles in policy assessment. In this essay, we discuss these three themes and comment on issues raised by Richard Craswell, Lewis Kornhauser, and Jeremy Waldron.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
27 Mar 03
|
|
Last Revised:
|
|
18 Apr 03
|
|
564
|
30
|
|
| |
Abstract:
In Fairness versus Welfare, we advance the thesis that social policies should be assessed based entirely on their effects on individuals' well-being. This thesis implies that no independent weight should be accorded to notions of fairness (other than many purely distributive notions). We support our thesis in three ways: By demonstrating how notions of fairness perversely reduce welfare, indeed, sometimes everyone's well-being; by revealing numerous other deficiencies in the notions, including their lack of sound rationales; and by providing an account of notions of fairness that explains their intuitive appeal in a manner that reinforces the conclusion that they should not be treated as independent principles in policy assessment. In this essay, we discuss these three themes and comment on issues raised by Richard Craswell, Lewis Kornhauser, and Jeremy Waldron.
|
|
|
|
|
|
7.
|
|
Taxation
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
09 May 06
|
|
Last Revised:
|
|
31 Jul 06
|
|
574 ( 12,393) |
69
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
31 Jul 06
|
|
Last Revised:
|
|
31 Jul 06
|
|
525
|
69
|
|
| |
Abstract:
This Handbook entry presents a conceptual, normative overview of the subject oftaxation. It emphasizes the relationships among the main functions of taxation - notably, raisingrevenue, redistributing income, and correcting externalities - and the mapping between thesefunctions and various forms of taxation. Different types of taxation as well as expenditures ontransfers and public goods are each integrated into a common optimal tax framework with theincome tax and commodity taxes at the core. Additional topics addressed include a range ofdynamic issues, the unit of taxation, tax administration and enforcement, and tax equity.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
09 May 06
|
|
Last Revised:
|
|
15 May 06
|
|
49
|
67
|
|
| |
Abstract:
This Handbook entry presents a conceptual, normative overview of the subject of taxation. It emphasizes the relationships among the main functions of taxation -- notably, raising revenue, redistributing income, and correcting externalities -- and the mapping between these functions and various forms of taxation. Different types of taxation as well as expenditures on transfers and public goods are each integrated into a common optimal tax framework with the income tax and commodity taxes at the core. Additional topics addressed include a range of dynamic issues, the unit of taxation, tax administration and enforcement, and tax equity.
|
|
|
|
|
|
8.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
12 Oct 05
|
|
Last Revised:
|
|
30 Nov 05
|
|
538 (13,620)
|
1
|
|
| |
Abstract:
The Pareto principle, the seemingly incontrovertible dictum that if all individuals prefer some regime to another then so should society, may conflict with competing principles. Arrow's impossibility theorem and Sen's liberal paradox are two notable examples. Subsequent work indicates more broadly that the Pareto principle conflicts with all non-welfarist principles. This essay surveys these results, including various extensions thereof, and offers perspectives on the conflict, drawing on classical and contemporary work in political economy and economic psychology.
|
|
|
9.
|
|
Moral Rules and the Moral Sentiments: Toward a Theory of an Optimal Moral System
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
|
Posted:
|
|
13 Dec 01
|
|
Last Revised:
|
|
07 Jan 02
|
|
523 ( 14,228) |
19
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
20 Dec 01
|
|
Last Revised:
|
|
07 Jan 02
|
|
28
|
19
|
|
| |
Abstract:
We examine how moral sanctions and rewards, notably the moral sentiments involving feelings of guilt and virtue, would be employed to govern individuals' behavior if the objective were to maximize social welfare. In our model, we analyze how the optimal use of guilt and virtue is influenced by the nature of the behavior under consideration, the costs of inculcating moral rules, constraints on the capacity to experience guilt and virtue, the fact that guilt and virtue often must be applied to groups of acts rather than be tailored to every conceivable type of act, and the direct effect of feelings of guilt and virtue on individuals' utility. We also consider a number of ways that the model could be extended, discuss the extent to which our analysis is consistent with the observed use of guilt and virtue, and relate our conclusions to longstanding philosophical debates about morality.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
13 Dec 01
|
|
Last Revised:
|
|
20 Dec 01
|
|
495
|
19
|
|
| |
Abstract:
We examine how moral sanctions and rewards, notably the moral sentiments involving feelings of guilt and virtue, would be employed to govern individuals' behavior if the objective were to maximize social welfare. In our model, we analyze how the optimal use of guilt and virtue is influenced by the nature of the behavior under consideration, the costs of inculcating moral rules, constraints on the capacity to experience guilt and virtue, the fact that guilt and virtue often must be applied to groups of acts rather than be tailored to every conceivable type of act, and the direct effect of feelings of guilt and virtue on individuals' utility. We also consider a number of ways that the model could be extended, discuss the extent to which our analysis is consistent with the observed use of guilt and virtue, and relate our conclusions to longstanding philosophical debates about morality.
|
|
|
|
|
|
10.
|
|
Taxation and Redistribution: Some Clarifications
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
21 Aug 03
|
|
Last Revised:
|
|
21 Dec 07
|
|
431 ( 18,428) |
1
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
21 Dec 07
|
|
Last Revised:
|
|
21 Dec 07
|
|
0
|
|
|
| |
Abstract:
This article revisits certain basic features of tax systems as they relate to redistribution. It focuses on how the actual differences between proportional and graduated taxes with regard to redistribution are, in important respects, not what many believe or implicitly assume. The analysis seeks to clarify tax policy debates, including those surrounding classic treatments of progressivity and contemporary flat tax proposals.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
21 Aug 03
|
|
Last Revised:
|
|
21 Aug 03
|
|
431
|
1
|
|
| |
Abstract:
This essay revisits certain basic features of tax systems as they relate to redistribution. It focuses on how the actual differences between proportional and graduated taxes with regard to redistribution diverge in important ways from what many believe or implicitly assume. The analysis seeks to clarify tax policy debates, including those surrounding classic treatments of progressivity and contemporary flat tax proposals.
|
|
|
|
|
|
11.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
18 Mar 02
|
|
Last Revised:
|
|
26 Mar 02
|
|
383 (21,480)
|
2
|
|
| |
Abstract:
In this article, we ask what system of moral rules would be best from a consequentialist perspective, given certain aspects of human nature. This question is of inherent conceptual interest and is important to explore in order better to understand the moral systems that we observe and to illuminate longstanding debates in moral theory. We make what seem to be plausible assumptions about aspects of human nature and the moral sentiments and then derive conclusions about the optimal consequentialist moral system - concerning which acts should be deemed right and wrong, and to what degree. We suggest that our results have some correspondence with observed moral systems and also help to clarify certain points of disagreement among moral theorists.
|
|
|
12.
|
|
Primary Goods, Capabilities, . . . Or Well-Being?
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
20 Nov 07
|
|
Last Revised:
|
|
17 Mar 08
|
|
319 ( 26,894) |
2
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
25 Feb 08
|
|
Last Revised:
|
|
17 Mar 08
|
|
143
|
|
|
| |
Abstract:
Optimal taxation concerns how various forms of taxation should be designed to maximize social welfare. The task requires an integrated consideration of the revenue-raising and distributive objectives of taxation. The central instrument in developed economies is the labor income tax, the analysis of which was pioneered by Mirrlees (1971). Subsequently, Atkinson and Stiglitz (1976) showed how commodity taxes should be set in the presence of an optimal income tax, the results differing qualitatively from, and in important respects displacing, the teachings derived from Ramsey's (1927) seminal analysis of the pure commodity tax problem.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
20 Nov 07
|
|
Last Revised:
|
|
17 Mar 08
|
|
176
|
2
|
|
| |
Abstract:
Theories of distributive justice and of the aggregate social good typically require a method of assessing each individual's situation. Among the common measures are primary goods, capabilities, and well-being. This article advances the argument that approaches that focus on the means of fulfillment, where the means are multi-dimensional, are subject to an objection if advanced as ideal normative theories. In general, it is possible to raise every individual's well-being by deviating from the dictates of means-based theories. This result is problematic not only on welfarist grounds but also if freedom, autonomy, or consent is regarded to be important. It is suggested that means-based theories nevertheless have appeal, but for instrumental, not intrinsic reasons.
|
|
|
|
|
|
13.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
16 Jan 01
|
|
Last Revised:
|
|
16 Jan 01
|
|
309 (27,924)
|
8
|
|
| |
Abstract:
Most legal academics and policymakers believe that weight should be accorded to conceptions of fairness in evaluating legal policies. In other writings, we have demonstrated that adherence to any notion of fairness will sometimes lead to a conflict with the Pareto principle. That is, to endorse a notion of fairness is to endorse the view that it can be desirable to adopt a legal rule that will reduce the well-being of every person in society. In this comment, we will be arguing that Howard Chang's position in his reply to one of our articles, in which he suggests that it is possible to imagine some notions of fairness under which this conflict does not exist, is tantamount to an abandonment of logical consistency in normative assessment of policy.
|
|
|
14.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
12 Oct 05
|
|
Last Revised:
|
|
19 Oct 05
|
|
301 (28,808)
|
|
|
| |
Abstract:
Various economic literatures address the question whether first-best prescriptions for government policy require modification because redistributive income taxation distorts labor supply and cannot achieve the distributive ideal. Perhaps second-best rules for public goods provision, corrective taxation, public sector pricing, and other government activity should reflect concerns about distribution and labor supply distortion. Recent work demonstrates, however, that in basic cases first-best principles remain applicable. Demonstrations make use of income tax adjustments that preserve not only budget balance but also the pre-reform distribution of utility.
|
|
|
15.
|
|
Why Measure Inequality?
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
30 Nov 02
|
|
Last Revised:
|
|
16 Dec 02
|
|
281 ( 31,146) |
9
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
03 Dec 02
|
|
Last Revised:
|
|
16 Dec 02
|
|
248
|
9
|
|
| |
Abstract:
A large body of literature is devoted to the measurement of income inequality, yet little attention is given to the question, Why measure inequality? However, the reasons for measurement bear importantly on whether and how measurement should be done. Upon examination, normative measures are found to be of questionable value. Descriptive measures, by contrast, may be useful, but the appropriate measure depends on the field of application rather than on general, a priori principles of the sort that are emphasized in the existing measurement literature. Measures of poverty are also considered, and similar conclusions are reached.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
30 Nov 02
|
|
Last Revised:
|
|
15 Nov 02
|
|
33
|
9
|
|
| |
Abstract:
A large body of literature is devoted to the measurement of income inequality, yet little attention is given to the question, Why measure inequality? However, the reasons for measurement bear importantly on whether and how measurement should be done. Upon examination, normative measures are found to be of questionable value. Descriptive measures, by contrast, may be useful, but the appropriate measure depends on the field of application rather than on general, a priori principles of the sort that are emphasized in the existing measurement literature. Measures of poverty are also considered, and similar conclusions are reached.
|
|
|
|
|
|
16.
|
|
Public Goods and the Distribution of Income
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
20 Jul 03
|
|
Last Revised:
|
|
28 Sep 03
|
|
274 ( 32,058) |
7
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
21 Aug 03
|
|
Last Revised:
|
|
28 Sep 03
|
|
248
|
7
|
|
| |
Abstract:
This article addresses conceptual issues concerning the distributive incidence of public goods. Solutions depend on the specific purposes for asking the question of distributive incidence - notably, assessing the extent to which various public goods should be provided, determining how the provision of public goods affects the desirability of income redistribution, and providing a meaningful description of the distribution of well-being. In the course of the analysis, a simple and intuitive version of the benefit principle of taxation (qualitatively different from those commonly advanced in pertinent literatures) is presented, and some of the problems confronting empirical attempts to measure the distributive incidence of public goods are resolved.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
20 Jul 03
|
|
Last Revised:
|
|
20 Jul 03
|
|
26
|
7
|
|
| |
Abstract:
This article addresses conceptual issues concerning the distributive incidence of public goods. Solutions depend on the specific purposes for asking the question of distributive incidence - notably, assessing the extent to which various public goods should be provided, determining how the provision of public goods affects the desirability of income redistribution, and providing a meaningful description of the distribution of well-being. In the course of the analysis, a simple and intuitive version of the benefit principle of taxation (qualitatively different from those commonly advanced in pertinent literatures) is presented, and some of the problems confronting empirical attempts to measure the distributive incidence of public goods are resolved.
|
|
|
|
|
|
17.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
21 Sep 04
|
|
Last Revised:
|
|
21 Sep 04
|
|
262 (33,767)
|
1
|
|
| |
Abstract:
Our thesis in Fairness versus Welfare is that social policies should be assessed entirely on the basis of how they affect individuals' well-being. This claim implies that no independent weight should be granted to deontological principles. We support our thesis with three sets of arguments: a demonstration that deontological principles lead to perverse reductions in welfare, indeed, sometimes to a decline in everyone's well-being; the presentation of numerous other difficulties with the principles, including their lack of intellectually satisfying rationales; and a reconciliation of the intuitive appeal of the principles with our thesis that they should not be viewed as directly relevant to the assessment of social policy. In this essay, we explain that the critique of Professor Ripstein largely fails to respond to any of these arguments.
|
|
|
18.
|
|
The Value of a Statistical Life and the Coefficient of Relative Risk Aversion
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
23 Jul 03
|
|
Last Revised:
|
|
21 Aug 03
|
|
238 ( 37,510) |
11
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
21 Aug 03
|
|
Last Revised:
|
|
21 Aug 03
|
|
214
|
11
|
|
| |
Abstract:
Individuals' risk preferences are estimated and employed in a variety of settings, notably including choices in financial, labor, and product markets. Recent work, especially in financial economics, provides estimates of individuals' coefficients of relative risk aversion (CRRA's) in excess of one, and often significantly higher. However, it can be shown that high CRAA's imply equally high values for the income elasticity of the value of a statistical life. Yet estimates of this elasticity, derived from labor and product markets, are in the range of 0.5 to 0.6. Furthermore, it turns out that even a CRRA below one is difficult to reconcile with these elasticity estimates. Thus, there appears to be an important (additional) anomaly involving individuals' risk-taking behavior in different market settings.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
23 Jul 03
|
|
Last Revised:
|
|
23 Jul 03
|
|
24
|
11
|
|
| |
Abstract:
Individuals' risk preferences are estimated and employed in a variety of settings, notably including choices in financial, labor, and product markets. Recent work, especially in financial economics, provides estimates of individuals' coefficients of relative risk aversion (CRRA's) in excess of one, and often significantly higher. However, it can be shown that high CRRA's imply equally high values for the income elasticity of the value of a statistical life. Yet estimates of this elasticity, derived from labor and product markets, are in the range of 0.5 to 0.6. Furthermore, it turns out that even a CRRA below one is difficult to reconcile with these elasticity estimates. Thus, there appears to be an important (additional) anomaly involving individuals' risk-taking behavior in different market settings.
|
|
|
|
|
|
19.
|
|
Horizontal Equity: New Measures, Unclear Principles
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
16 May 00
|
|
Last Revised:
|
|
04 Apr 01
|
|
222 ( 40,335) |
9
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
16 May 00
|
|
Last Revised:
|
|
02 Apr 01
|
|
24
|
9
|
|
| |
Abstract:
Alan Auerbach and Kevin Hassett offer a new measure of horizontal equity (HE) that is designed to overcome deficiencies in prior indexes. There is, however, a fundamental problem that their effort shares with their predecessors' attempts: the underlying rationale for pursuing HE at the expense of individuals' well-being is never stated. Moreover, as discussed here, it appears that no plausible rationale can be given because the essence of HE involves giving weight to morally arbitrary factors. Indeed, pursuing HE may even conflict with the Pareto principle. On reflection, it seems that the appeal of HE is specious: HE does not possess intrinsic value, but rather is a rough proxy concept that may signal various ways in which unequal treatment of individuals can lead to a loss in social welfare. Unfortunately, HE indexes are not very useful even with regard to HE's proxy role.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
22 Jun 00
|
|
Last Revised:
|
|
04 Apr 01
|
|
198
|
9
|
|
| |
Abstract:
Alan Auerbach and Kevin Hassett offer a new measure of horizontal equity (HE) that is designed to overcome deficiencies in prior indexes. There is, however, a fundamental problem that their effort shares with their predecessors' attempts: the underlying rationale for pursuing HE at the expense of individuals' well-being is never stated. Moreover, as discussed here, it appears that no plausible rationale can be given because the essence of HE involves giving weight to morally arbitrary factors. Indeed, pursuing HE may even conflict with the Pareto principle. On reflection, it seems that the appeal of HE is specious: HE does not possess intrinsic value, but rather is a rough proxy concept that may signal various ways in which unequal treatment of individuals can lead to a loss in social welfare. Unfortunately, HE indexes are not very useful even with regard to HE's proxy role.
|
|
|
|
|
|
20.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
09 Feb 04
|
|
Last Revised:
|
|
12 Feb 04
|
|
213 (42,108)
|
34
|
|
| |
Abstract:
In our 2001 article in the Journal of Political Economy, we show that any non-welfarist method of policy assessment violates the Pareto principle. In their Comment, Fleurbaey, Tungodden, and Chang question whether our result is fully general without imposing what they regard to be strong assumptions (transitivity and independence). However, as we explain in this Reply, their argument is irrelevant to the thrust of our article. Specifically, their argument concedes that if any particular society uses any non-welfarist principle, there may be a conflict with the Pareto principle. This result means that the vast multitude of principles proposed by policy-makers, philosophers, and others indeed fall within our demonstration.
|
|
|
21.
|
|
Should Legal Rules Favor the Poor? Clarifying the Role of Legal Rules and the Income Tax in Redistributing Income
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
|
Posted:
|
|
23 Jun 00
|
|
Last Revised:
|
|
04 Apr 01
|
|
212 ( 42,341) |
13
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
23 Jun 00
|
|
Last Revised:
|
|
04 Apr 01
|
|
0
|
|
|
| |
Abstract:
In our 1994 article in this Journal, we demonstrated that legal rules should not be adjusted to disfavor the rich and favor the poor in order to redistribute income, because the income tax and transfer system is a more efficient means of redistribution. In this article, we revisit our argument and others that favor relying on the income tax system to redistribute income, and we then focus on qualifications to our argument that we previously offered. In particular, we elaborate on a qualification that is the subject of Sanchirico's article in this issue of the Journal and explain why it has only a tangential bearing on the question whether legal rules should favor the poor and it is of doubtful practical importance.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
23 Jun 00
|
|
Last Revised:
|
|
04 Apr 01
|
|
212
|
13
|
|
| |
Abstract:
In our 1994 article in this Journal, we demonstrated that legal rules should not be adjusted to disfavor the rich and favor the poor in order to redistribute income, because the income tax and transfer system is a more efficient means of redistribution. In this article, we revisit our argument and others that favor relying on the income tax system to redistribute income, and we then focus on qualifications to our argument that we previously offered. In particular, we elaborate on a qualification that is the subject of Sanchirico's article in this issue of the Journal and explain why it has only a tangential bearing on the question whether legal rules should favor the poor and it is of doubtful practical importance.
|
|
|
|
|
|
22.
|
|
A Framework for Assessing Estate and Gift Taxation
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
17 Jul 00
|
|
Last Revised:
|
|
01 Apr 01
|
|
208 ( 43,155) |
12
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
01 Aug 00
|
|
Last Revised:
|
|
01 Aug 00
|
|
183
|
12
|
|
| |
Abstract:
Whether and how estates and gifts should be taxed has long been a controversial subject, and the approach to estate and gift taxation varies among developed countries. Arguments for and against various forms of transfer taxation have focused on concerns about the distribution of income and wealth, intergenerational equity, raising revenue, savings incentives, and other economic and philosophical issues. This essay has two purposes. The first is to examine the conceptual basis for various arguments for and against the current estate and gift tax regime and proposed alternatives. The second is to integrate policy analysis of transfer taxation with that of the rest of the tax system, notably, the income tax. The analysis begins by considering how it would be optimal to tax transfers if they are viewed simply one of many forms of expenditure by donors, and then it explores how the distinctive features of gifts and bequests may alter the conclusions. The importance of different transfer motives is discussed, and the analysis is reconsidered in the light of the importance of human capital in intergenerational transfers; differences between inter vivos transfers and bequests, between gifts to individuals and gifts to charitable institutions, and among gifts to donees having varying relationships to the donor; and the possibility that transfers are not explained by maximizing behavior.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
17 Jul 00
|
|
Last Revised:
|
|
01 Apr 01
|
|
25
|
12
|
|
| |
Abstract:
Whether and how estates and gifts should be taxed has long been a controversial subject, and the approach to estate and gift taxation varies among developed countries. Arguments for and against various forms of transfer taxation have focused on concerns about the distribution of income and wealth, intergenerational equity, raising revenue, savings incentives, and other economic and philosophical issues. This essay has two purposes. The first is to examine the conceptual basis for various arguments for and against the current estate and gift tax regime and proposed alternatives. The second is to integrate policy analysis of transfer taxation with that of the rest of the tax system, notably, the income tax. The analysis begins by considering how it would be optimal to tax transfers if they are viewed simply one of many forms of expenditure by donors, and then it explores how the distinctive features of gifts and bequests may alter the conclusions. The importance of different transfer motives is discussed, and the analysis is reconsidered in the light of the importance of human capital in intergenerational transfers; differences between inter vivos transfers and bequests, between gifts to individuals and gifts to charitable institutions, and among gifts to donees having varying relationships to the donor; and the possibility that transfers are not explained by maximizing behavior.
|
|
|
|
|
|
23.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
18 Mar 02
|
|
Last Revised:
|
|
16 Jul 02
|
|
207 (43,388)
|
|
|
| |
Abstract:
Nonwelfarist principles - notably, deontological principles - are often advanced to guide moral decisions. The types of choices addressed by such principles typically seem, on their face, to involve conflicts of interests among individuals. Nevertheless, it can be demonstrated that any nonwelfarist principle will, in some circumstances, favor choices that make all individuals worse off. For a variety of reasons, this conclusion has important implications for moral theories that are understood to support nonwelfarist principles.
|
|
|
24.
|
|
On the Superiority of Corrective Taxes to Quantity Regulation
|
Show Abstracts |
Hide Abstracts |
Versions (3)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
|
Posted:
|
|
10 Feb 98
|
|
Last Revised:
|
|
29 Feb 08
|
|
202 ( 44,468) |
17
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
29 Feb 08
|
|
Last Revised:
|
|
29 Feb 08
|
|
27
|
17
|
|
| |
Abstract:
The traditional view of economists has been that corrective taxes are superior to direct regulation of harmful externalities when the state's information about control costs is incomplete. In recent years, however, many economists seem to have adopted a different view-that either corrective taxes or quantity regulation could be superior to the other. We emphasize that one argument for this newer view, identified with Weitzman (1974), holds only if the state is constrained to use a fixed tax rate (a linear tax schedule) even when harm is nonlinear. But if-as seems more plausible-the state can impose a nonlinear tax equal to the schedule of harm or can adjust the tax rate upon learning that it diverges from marginal harm, then corrective taxes are superior to quantity regulation. Another argument favoring quantity regulation is that it gains appeal when the state is uncertain about the harm caused by an externality. In this case, however, a corrective tax schedule (equal to the expected harm schedule) is superior to quantity regulation.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
20 Jul 00
|
|
Last Revised:
|
|
20 Jul 00
|
|
18
|
17
|
|
| |
Abstract:
The traditional view of economists has been that corrective taxes are superior to direct" regulation of harmful externalities when the state's information about control costs is incomplete. " In recent years, however, many economists seem to have adopted the view that either corrective" taxes or quantity regulation could be superior to the other. One argument for this view with Weitzman (1974), holds only if the state is constrained to use a fixed tax rate (a linear tax" schedule) even when harm is nonlinear. Corrective taxes are indeed superior to quantity" regulation if -- as seems more plausible -- the state can impose a nonlinear tax equal to the" schedule of harm or can adjust the tax rate upon learning that it diverges from marginal harm. " Another argument, associated with Baumol and Oates (1988), is that quantity regulation gains" appeal when the state is uncertain about the harm caused by an externality. In this case however, a corrective tax schedule (equal to the expected harm schedule) is superior to quantity" regulation.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
10 Feb 98
|
|
Last Revised:
|
|
18 May 98
|
|
157
|
17
|
|
| |
Abstract:
The traditional view of economists has been that corrective taxes are superior to direct regulation of harmful externalities when the state's information about control costs is incomplete. In recent years, however, many economists seem to have adopted the view that either corrective taxes or quantity regulation could be superior to the other. One argument for this view, identified with Weitzman (1974), holds only if the state is constrained to use a fixed tax rate (a linear tax schedule) even when harm is nonlinear. Corrective taxes are indeed superior to quantity regulation if -- as seems more plausible -- the state can impose a nonlinear tax equal to the schedule of harm or can adjust the tax rate upon learning that it diverges from marginal harm. Another argument, associated with Baumol and Oates (1988), is that quantity regulation gains appeal when the state is uncertain about the harm caused by an externality. In this case, however, a corrective tax schedule (equal to the expected harm schedule) is superior to quantity regulation.
|
|
|
|
|
|
25.
|
|
Transition Policy: A Conceptual Framework
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
27 Mar 03
|
|
Last Revised:
|
|
04 Oct 09
|
|
198 ( 45,397) |
2
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
05 Apr 03
|
|
Last Revised:
|
|
04 Oct 09
|
|
22
|
2
|
|
| |
Abstract:
Legal change, whether through legislation, regulation, or court decision, is a common phenomenon, and virtually all reform creates both gains and losses for those who under the prior regime took actions that would have lasting effects. This article offers a conceptual framework for assessing the desirability of different transition policies, ranging from compensation of losses and taxation of gains, grandfathering of pre-enactment investments, and delayed or partial implementation to complete and immediate implementation or even retroactive application. Emphasis is placed on how transitions and various mitigation strategies affect the incentives of and risk borne by private actors as well as on the behavior of government and how it may be affected by transition policy.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
27 Mar 03
|
|
Last Revised:
|
|
05 Apr 03
|
|
176
|
2
|
|
| |
Abstract:
Legal change, whether through legislation, regulation, or court decision, is a common phenomenon, and virtually all reform creates both gains and losses for those who under the prior regime took actions that would have lasting effects. This article offers a conceptual framework for assessing the desirability of different transition policies, ranging from compensation of losses and taxation of gains, grandfathering of pre-enactment investments, and delayed or partial implementation to complete and immediate implementation or even retroactive application. Emphasis is placed on how transitions and various mitigation strategies affect the incentives of and risk borne by private actors as well as on the behavior of government and how it may be affected by transition policy.
|
|
|
|
|
|
26.
|
|
Concavity of Utility, Concavity of Welfare, and Redistribution of Income
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
28 Sep 03
|
|
Last Revised:
|
|
05 Nov 03
|
|
162 ( 55,336) |
1
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
05 Nov 03
|
|
Last Revised:
|
|
05 Nov 03
|
|
134
|
1
|
|
| |
Abstract:
The marginal social value of income redistribution is understood to depend on both the concavity of individuals' utility functions and the concavity of the social welfare function. In the pertinent literatures, notably on optimal income taxation and on normative inequality measurement, it seems to be accepted that the role of these two sources of concavity is symmetric with regard to the social concern about inequality in the distribution of income. Direct examination of the question, however, reveals that this is not the case. Concavity of utility has a simple, direct effect on the marginal social value of redistribution, as might be expected, whereas concavity of the social welfare function has a more subtle influence, one that in some cases may not be very significant. The implications of this difference are examined for some standard forms of utility and welfare functions, including particular versions that appear in the optimal income taxation literature.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
28 Sep 03
|
|
Last Revised:
|
|
28 Sep 03
|
|
28
|
1
|
|
| |
Abstract:
The marginal social value of income redistribution is understood to depend on both the concavity of individuals' utility functions and the concavity of the social welfare function. In the pertinent literatures, notably on optimal income taxation and on normative inequality measurement, it seems to be accepted that the role of these two sources of concavity is symmetric with regard to the social concern about inequality in the distribution of income. Direct examination of the question, however, reveals that this is not the case. Concavity of utility has a simple, direct effect on the marginal social value of redistribution, as might be expected, whereas concavity of the social welfare function has a more subtle influence, one that in some cases may not be very significant. The implications of this difference are examined for some standard forms of utility and welfare functions, including particular versions that appear in the optimal income taxation literature.
|
|
|
|
|
|
27.
|
|
A Fundamental Objection to Tax Equity Norms: A Call for Utilitarianism
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
12 Dec 97
|
|
Last Revised:
|
|
07 Jul 00
|
|
159 ( 56,319) |
8
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
07 Jul 00
|
|
Last Revised:
|
|
07 Jul 00
|
|
19
|
8
|
|
| |
Abstract:
Anti-utilitarian norms often are used in assessing tax systems. Two motivations support this practice. First, many believe utilitarianism to be insufficiently egalitarian. Second, utilitarianism does not give independent weight to other equitable principles, notably concerns that reforms may violate horizontal equity or result in rank reversals in the income distribution. This investigation suggests that a policy maker who believes in the Pareto principle - that any reform preferred by everyone should be adopted - cannot consistently adhere to any of these anti-utilitarian sentiments. Moreover, the affirmative case for utilitarian tax policy assessment is stronger than is generally appreciated.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
12 Dec 97
|
|
Last Revised:
|
|
31 Mar 98
|
|
140
|
8
|
|
| |
Abstract:
Anti-utilitarian norms often are used in assessing tax systems. Two motivations support this practice. First, many believe utilitarianism to be insufficiently egalitarian. Second, utilitarianism does not give independent weight to other equitable principles, notably concerns that reforms may violate horizontal equity or result in rank reversals in the income distribution. This investigation suggests that a policy maker who believes in the Pareto principle -- that any reform preferred by everyone should be adopted -- cannot consistently adhere to any of these anti-utilitarian sentiments. Moreover, the affirmative case for utilitarian tax policy assessment is stronger than is generally appreciated.
|
|
|
|
|
|
28.
|
|
Discounting Dollars, Discounting Lives: Intergenerational Distributive Justice and Efficiency
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
25 May 06
|
|
Last Revised:
|
|
23 Jan 07
|
|
154 ( 58,078) |
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
31 Jul 06
|
|
Last Revised:
|
|
23 Jan 07
|
|
139
|
|
|
| |
Abstract:
The view that intergenerational distributive justice and efficiency should be treated separately is familiar, yet controversial. This article elaborates the often-implicit justifications for separate treatment and provides a more express statement of how and when such treatment is appropriate. Substantial attention is devoted to an approach that holds constant the intra- and intergenerational distribution of well-being, which proves to be a valuable analytical device even for intergenerational policies that are not distribution neutral. Also explored are possible interrelationships between intergenerational distributive justice and efficiency, the choice of interest rate for discounting dollars, and how the present approach relates to those that would employ direct social weights to dollars at different points in time.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
25 May 06
|
|
Last Revised:
|
|
27 Jul 06
|
|
15
|
|
|
| |
Abstract:
The view that intergenerational distributive justice and efficiency should be treated separately is familiar, yet controversial. This article elaborates the often-implicit justifications for separate treatment and provides a more express statement of how and when such treatment is appropriate. Substantial attention is devoted to an approach that holds constant the intra- and intergenerational distribution of well-being, which proves to be a valuable analytical device even for intergenerational policies that are not distribution neutral. Also explored are possible interrelationships between intergenerational distributive justice and efficiency, the choice of interest rate for discounting dollars, and how the present approach relates to those that would employ direct social weights to dollars at different points in time.
|
|
|
|
|
|
29.
|
|
On the Undesirability of Commodity Taxation Even When Income Taxation is Not Optimal
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
19 Apr 04
|
|
Last Revised:
|
|
21 Oct 04
|
|
151 ( 59,151) |
19
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
19 Oct 04
|
|
Last Revised:
|
|
21 Oct 04
|
|
132
|
19
|
|
| |
Abstract:
An important result due to Atkinson and Stiglitz (1976) is that differential commodity taxation is not optimal in the presence of an optimal nonlinear income tax (given weak separability of utility between labor and all consumption goods). This article demonstrates that their conclusion holds regardless of whether the income tax is optimal. In particular, given any commodity tax and income tax system, differential commodity taxation can be eliminated in a manner that results in a Pareto improvement. Also, differential commodity taxation can be proportionally reduced so as to generate a Pareto improvement. In addition, for commodity tax reforms that do not eliminate or proportionally reduce differential taxation, a simple efficiency condition is offered for determining whether a Pareto improvement is possible.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
19 Apr 04
|
|
Last Revised:
|
|
19 Apr 04
|
|
19
|
19
|
|
| |
Abstract:
An important result due to Atkinson and Stiglitz (1976) is that differential commodity taxation is not optimal in the presence of an optimal nonlinear income tax (given weak separability of utility between labor and all consumption goods). This article demonstrates that their conclusion holds regardless of whether the income tax is optimal. In particular, given any commodity tax and income tax system, differential commodity taxation can be eliminated in a manner that results in a Pareto improvement. Also, differential commodity taxation can be proportionally reduced so as to generate a Pareto improvement. In addition, for commodity tax reforms that do not eliminate or proportionally reduce differential taxation, a simple efficiency condition is offered for determining whether a Pareto improvement is possible.
|
|
|
|
|
|
30.
|
|
Optimal Control of Externalities in the Presence of Income Taxation
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
14 Jul 06
|
|
Last Revised:
|
|
25 Jan 07
|
|
106 ( 79,352) |
6
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
31 Jul 06
|
|
Last Revised:
|
|
25 Jan 07
|
|
90
|
6
|
|
| |
Abstract:
A substantial literature examines second-best environmental policy, focusing particularly on how the Pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation. Additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription. It is demonstrated, however, that simple first-best rules - unmodified for labor supply distortion or distribution - are correct in a natural, basic formulation of the problem. Specifically, setting all commodity taxes equal to marginal harms (and subsidies equal to marginal benefits) can generate a Pareto improvement. Likewise, a marginal reform in the direction of the first-best can yield a Pareto improvement. For other reforms, a simple efficiency test characterizing when a Pareto improvement is possible is offered. Qualifications and explanations for the substantial departure from results in previous work are also elaborated.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
14 Jul 06
|
|
Last Revised:
|
|
07 Sep 06
|
|
16
|
6
|
|
| |
Abstract:
A substantial literature examines second-best environmental policy, focusing particularly on how the Pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation. Additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription. It is demonstrated, however, that simple first-best rules - unmodified for labor supply distortion or distribution - are correct in a natural, basic formulation of the problem. Specifically, setting all commodity taxes equal to marginal harms (and subsidies equal to marginal benefits) can generate a Pareto improvement. Likewise, a marginal reform in the direction of the first-best can yield a Pareto improvement. For other reforms, a simple efficiency test characterizing when a Pareto improvement is possible is offered. Qualifications and explanations for the substantial departure from results in previous work are also elaborated.
|
|
|
|
|
|
31.
|
|
Optimal Income Transfers
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
08 Jun 06
|
|
Last Revised:
|
|
11 Sep 06
|
|
98 ( 84,039) |
6
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
31 Jul 06
|
|
Last Revised:
|
|
11 Sep 06
|
|
81
|
6
|
|
| |
Abstract:
A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income tax, yet formulations of such a tax necessarily address how low-income individuals should be treated. This paper draws on the optimal income taxation literature to illuminate the analysis of transfer programs, including the level and shape of marginal tax rates (including phase-outs), the structure of categorical assistance, and the role of work inducements in an optimal income transfer scheme.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
08 Jun 06
|
|
Last Revised:
|
|
07 Aug 06
|
|
17
|
6
|
|
| |
Abstract:
A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income tax, yet formulations of such a tax necessarily address how low-income individuals should be treated. This paper draws on the optimal income taxation literature to illuminate the analysis of transfer programs, including the level and shape of marginal tax rates (including phase-outs), the structure of categorical assistance, and the role of work inducements in an optimal income transfer scheme.
|
|
|
|
|
|
32.
|
|
Optimal Policy with Heterogeneous Preferences
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
16 Jul 08
|
|
Last Revised:
|
|
14 Jul 09
|
|
93 ( 87,207) |
6
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
25 Jul 08
|
|
Last Revised:
|
|
28 Jul 08
|
|
88
|
6
|
|
| |
Abstract:
Optimal policy rules - including those regarding income taxation, commodity taxation, public goods, and externalities - are typically derived in models with homogeneous preferences. This article reconsiders many central results for the case in which preferences for commodities, public goods, and externalities are heterogeneous. When preference differences are observable, standard second-best results in basic settings are unaffected, except those for the optimal income tax. Optimal levels of income taxation may be higher, the same, or lower on types who derive more utility from various goods, depending on the nature of preference differences and the concavity of the social welfare function. When preference differences are unobservable, all policy rules may change. The determinants of even the direction of optimal rule adjustments are many and subtle.
heterogeous preferences, optimal income taxation, commodity taxation, externailities, public goods, social welfare
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
16 Jul 08
|
|
Last Revised:
|
|
14 Jul 09
|
|
5
|
6
|
|
| |
Abstract:
Optimal policy rules--including those regarding income taxation, commodity taxation, public goods, and externalities--are typically derived in models with homogeneous preferences. This article reconsiders many central results for the case in which preferences for commodities, public goods, and externalities are heterogeneous. When preference differences are observable, standard second-best results in basic settings are unaffected, except those for the optimal income tax. Optimal levels of income taxation may be higher, the same, or lower on types who derive more utility from various goods, depending on the nature of preference differences and the concavity of the social welfare function. When preference differences are unobservable, all policy rules may change. The determinants of even the direction of optimal rule adjustments are many and subtle.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
|
|
|
|
|
|
33.
|
|
Myopia and the Effects of Social Security and Capital Taxation on Labor Supply
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
21 Aug 06
|
|
Last Revised:
|
|
10 Nov 06
|
|
93 ( 87,207) |
1
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
24 Aug 06
|
|
Last Revised:
|
|
31 Aug 06
|
|
77
|
1
|
|
| |
Abstract:
Myopia is increasingly believed to be a significant determinant of behavior and also plays a central role in justifications for social security and policies toward the taxation of capital. It is important, however, to account for labor supply effects, particularly in light of the preexisting distortion due to labor income taxation. For example, might even actuarially fair social security have the highly distortionary effect of a tax on top of an existing tax (the income tax) because myopic individuals give excessive weight to present levies on earnings that finance distant future benefits? Similarly, might greater reliance on capital rather than labor income taxation be attractive because collections are in the future rather than when earnings are received? To answer these and other questions, this article analyzes the effect of such policies on labor supply in a model that explicitly incorporates myopic decision-making. Many of the results may seem counterintuitive. In most respects, even with myopia, social security has qualitatively different effects than those of a tax levied on top of an existing tax. Both social security and capital taxation may cause labor supply to rise or fall when individuals are myopic, depending on the curvature of individuals' utility as a function of consumption. Moreover, whatever is the sign of these effects under one assumption about how myopia relates to labor supply decisions, the sign is reversed under the other assumption that is considered. Additionally, some interventions have a first-order effect on labor supply from the outset but others do not, and some labor supply effects rise with the magnitude of the intervention whereas others fall.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
21 Aug 06
|
|
Last Revised:
|
|
10 Nov 06
|
|
16
|
1
|
|
| |
Abstract:
Myopia is increasingly believed to be a significant determinant of behavior and also plays a central role in justifications for social security and policies toward the taxation of capital. It is important, however, to account for labor supply effects, particularly in light of the preexisting distortion due to labor income taxation. For example, might even actuarially fair social security have the highly distortionary effect of a tax on top of an existing tax (the income tax) because myopic individuals give excessive weight to present levies on earnings that finance distant future benefits? Similarly, might greater reliance on capital rather than labor income taxation be attractive because collections are in the future rather than when earnings are received? To answer these and other questions, this article analyzes the effect of such policies on labor supply in a model that explicitly incorporates myopic decision-making. Many of the results may seem counterintuitive. In most respects, even with myopia, social security has qualitatively different effects than those of a tax levied on top of an existing tax. Both social security and capital taxation may cause labor supply to rise or fall when individuals are myopic, depending on the curvature of individuals' utility as a function of consumption. Moreover, whatever is the sign of these effects under one assumption about how myopia relates to labor supply decisions, the sign is reversed under the other assumption that is considered. Additionally, some interventions have a first-order effect on labor supply from the outset but others do not, and some labor supply effects rise with the magnitude of the intervention whereas others fall.
|
|
|
|
|
|
34.
|
|
Taxing Leisure Complements
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
10 Oct 08
|
|
Last Revised:
|
|
17 Dec 08
|
|
90 ( 89,205) |
3
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
24 Nov 08
|
|
Last Revised:
|
|
17 Dec 08
|
|
67
|
3
|
|
| |
Abstract:
Ever since Corlett and Hague (1953), it has been understood that it tends to be optimal on second-best grounds to (relatively) tax complements to leisure and subsidize substitutes because doing so helps to offset the distorting effect of taxation on labor supply. Yet in the context of simultaneous optimization of a nonlinear income tax and commodity taxes, Atkinson and Stiglitz (1976) claim to have demonstrated the opposite, that goods complementary with leisure should "face lower tax rates, whereas substitutes face higher tax rates." Derivations in leading texts on optimal taxation seem to yield opposing conclusions regarding the sign of optimal deviation of commodity taxes from uniformity. It is demonstrated that the optimality of relatively taxing leisure complements is indeed correct, and conflicting results are explained.
income taxation, commodity taxation, optimal taxation, leisure complements
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
10 Oct 08
|
|
Last Revised:
|
|
13 Oct 08
|
|
23
|
3
|
|
| |
Abstract:
Ever since Corlett and Hague (1953), it has been understood that it tends to be optimal on second-best grounds to (relatively) tax complements to leisure and subsidize substitutes because doing so helps to offset the distorting effect of taxation on labor supply. Yet in the context of simultaneous optimization of a nonlinear income tax and commodity taxes, Atkinson and Stiglitz (1976) claim to have demonstrated the opposite, that goods complementary with leisure should face lower tax rates, whereas substitutes face higher tax rates. Derivations in leading texts on optimal taxation seem to yield opposing conclusions regarding the sign of optimal deviation of commodity taxes from uniformity. It is demonstrated that the optimality of relatively taxing leisure complements is indeed correct, and conflicting results are explained.
|
|
|
|
|
|
35.
|
|
On the (Ir)Relevance of Distribution and Labor Supply Distortion to Government Policy
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
27 May 04
|
|
Last Revised:
|
|
05 Dec 04
|
|
86 ( 91,956) |
15
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
28 Oct 04
|
|
Last Revised:
|
|
05 Dec 04
|
|
74
|
15
|
|
| |
Abstract:
Should the assessment of government policies, such as the provision of public goods and the control of externalities, deviate from first-best principles to account for distributive effects and for the distortionary cost of labor income taxation? For example, is the optimal extent of public goods provision smaller than indicated by the Samuelson rule because finance is distortionary? Or should environmental regulations fail to internalize externalities fully if the incidence of the regulations is regressive? It is suggested that these questions are best addressed by considering distribution-neutral implementation, in which budget balance is achieved by choosing an adjustment to the income tax that offsets the distributive impact of the policy in question. In basic cases, both distribution and labor supply distortion are moot because the target policy and the tax adjustment produce offsetting effects on each. Thus, traditional first-best principles provide good benchmarks for policy analysis after all. Moreover, even when actual implementation will not be distribution neutral in aggregate, distribution-neutral policy analysis has many conceptual and practical virtues that render it quite useful to investigators.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
27 May 04
|
|
Last Revised:
|
|
02 Nov 04
|
|
12
|
15
|
|
| |
Abstract:
Should the assessment of government policies, such as the provision of public goods and the control of externalities, deviate from first-best principles to account for distributive effects and for the distortionary cost of labor income taxation? For example, is the optimal extent of public goods provision smaller than indicated by the Samuelson rule because finance is distortionary? Or should environmental regulations fail to internalize externalities fully if the incidence of the regulations is regressive? It is suggested that these questions are best addressed by considering distribution-neutral implementation, in which budget balance is achieved by choosing an adjustment to the income tax that offsets the distributive impact of the policy in question. In basic cases, both distribution and labor supply distortion are moot because the target policy and the tax adjustment produce offsetting effects on each. Thus, traditional first-best principles provide good benchmarks for policy analysis after all. Moreover, even when actual implementation will not be distribution neutral in aggregate, distribution-neutral policy analysis has many conceptual and practical virtues that render it quite useful to investigators.
|
|
|
|
|
|
36.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
07 Nov 05
|
|
Last Revised:
|
|
09 Nov 05
|
|
81 (95,642)
|
2
|
|
| |
Abstract:
Expensive tastes play an important role in contemporary theories of distributive justice. In particular, some suggest that individuals are not entitled to compensation for low well-being that is attributable to expensive tastes that the individuals have freely chosen. The origins of chosen expensive tastes have not been explored, but they should be. First, the reasons that individuals might choose them could bear on how moral analysis should take them into account. Second, the choice of expensive tastes is prima facie irrational, raising the question whether concern about individuals choosing expensive tastes is warranted in the first instance. This essay considers why, if ever, individuals might choose to develop or adopt what may appear to be expensive tastes, and it suggests that the normative implications of the answers may differ from those ordinarily associated with voluntary rational choice.
|
|
|
37.
|
|
Capital Levies and Transition to a Consumption Tax
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
01 Jun 06
|
|
Last Revised:
|
|
02 Feb 07
|
|
79 ( 97,198) |
3
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
31 Jul 06
|
|
Last Revised:
|
|
02 Feb 07
|
|
63
|
3
|
|
| |
Abstract:
The merits of capital levies depend on the likelihood of repetition, the extent of anticipation, and its effects on distribution. The relevance of these features, which in varying degrees is underdeveloped or underappreciated in pertinent literatures, is elaborated and then considered with regard to the problem of transition to a consumption tax. Other transition issues are distinguished, and specific attention is devoted to rate changes under a consumption tax and whether owners of preexisting capital are effectively compensated through higher net-of-tax returns due to repeal of the income tax. The analysis is also related to literature that examines dynamic models of taxation, particularly work simulating consumption tax transitions and assessing the optimality of capital taxation in the long run.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
01 Jun 06
|
|
Last Revised:
|
|
01 Jun 06
|
|
16
|
3
|
|
| |
Abstract:
The merits of capital levies depend on the likelihood of repetition, the extent of anticipation, and its effects on distribution. The relevance of these features, which in varying degrees is underdeveloped or underappreciated in pertinent literatures, is elaborated and then considered with regard to the problem of transition to a consumption tax. Other transition issues are distinguished, and specific attention is devoted to rate changes under a consumption tax and whether owners of preexisting capital are effectively compensated through higher net-of-tax returns due to repeal of the income tax. The analysis is also related to literature that examines dynamic models of taxation, particularly work simulating consumption tax transitions and assessing the optimality of capital taxation in the long run.
|
|
|
|
|
|
38.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
09 Jul 08
|
|
Last Revised:
|
|
19 Jan 09
|
|
55 (118,895)
|
11
|
|
| |
Abstract:
Table of Contents and Chapter 1.
|
|
|
39.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
07 Nov 07
|
|
Last Revised:
|
|
07 Nov 07
|
|
28 (153,741)
|
16
|
|
| |
Abstract:
No abstract is available for this paper.
|
|
|
40.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
19 Jun 04
|
|
Last Revised:
|
|
21 Sep 04
|
|
24 (162,683)
|
52
|
|
| |
Abstract:
Self-reporting - the reporting by parties of their own behavior to an enforcement authority - is a commonly observed aspect of law enforcement, as in the context of environmental and safety regulation. We add self-reporting to the model of the control of harmful externalities through probabilistic law enforcement. Optimal self-reporting schemes are characterized and are shown to offer two advantages over schemes without self-reporting: enforcement resources are saved because individuals who are led to report harmful acts need not be identified; risk is reduced because individuals bear certain uncertain sanctions.
|
|
|
41.
|
|
Accuracy, Complexity, and the Income Tax
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
13 Jan 98
|
|
Last Revised:
|
|
22 Nov 04
|
|
24 (162,683) |
6
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
26 Dec 00
|
|
Last Revised:
|
|
21 Sep 04
|
|
24
|
6
|
|
| |
Abstract:
The complexity of the income tax is an unending source of complaint. Compliance costs have received increasing attention and are estimated to be large. Yet most recognize that some degree of complexity is necessary if ability to pay is to be measured accurately. This article presents a framework for analyzing the value of greater accuracy in income taxation. Formulations for both distributive and incentive benefits of accuracy are offered. The question whether taxpayers have excessive or inadequate incentives to acquire information about taxable income and to challenge tax assessments is also examined.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
13 Jan 98
|
|
Last Revised:
|
|
22 Nov 04
|
|
0
|
|
|
| |
Abstract:
The complexity of the income tax is an unending source of complaint, and compliance costs are estimated to be very large. Yet most recognize that some degree of complexity is necessary if income is to be measured accurately. This article presents a framework for analyzing the value of greater accuracy in income taxation. Formulations for both distributive and incentive benefits of accuracy are offered. In addition, the article takes into account that compliance costs and the effects of complex provisions are endogenous, determined in significant part by taxpayers' information acquisition efforts. The article addresses whether taxpayers have excessive or inadequate incentives to acquire information about taxable income and to challenge tax assessments.
|
|
|
|
|
|
42.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
29 Feb 08
|
|
Last Revised:
|
|
29 Feb 08
|
|
22 (168,169)
|
|
|
| |
Abstract:
During the two decades before World War II, as this article demonstrates, the relationship between the Big Three American automakers and their parts suppliers was remarkably similar to the celebrated cooperation of Japanese auto assemblers and their trading partners after 1980. Unlike the arms-length multisourcing that characterized American firms after 1960, the prewar Detroit production culture featured collaborative development, cost sharing, and long-term innovative relationships. This system nurtured the rise of Chrysler, which not only grew from a standing start in 1920 to convert the General Motors-Ford duopoly into the `Big Three` by 1930, but also established itself as the industry`s leader in innovation and profitability.
|
|
|
43.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
06 Sep 00
|
|
Last Revised:
|
|
06 Sep 00
|
|
22 (168,169)
|
18
|
|
| |
Abstract:
Much criticism of the income tax involves administration: the enormous complexity of the system is responsible for large compliance costs, public and private, and the tax gap is large despite substantial resources devoted to enforcement. The desire for simplification and improved compliance motivates various incremental reforms as well as proposals for fundamental restructuring of the tax system. But evaluation of such changes is difficult because the underlying problems have not been analyzed in terms of the equity and efficiency concerns that animate more familiar assessments of income tax policy. This article provides a framework for a unified analysis, in which the same factors that are used to justify the choice of the tax base and the rate structure are employed to resolve problems involving complexity, compliance costs, and enforcement difficulties.
|
|
|
44.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
18 Apr 00
|
|
Last Revised:
|
|
04 May 02
|
|
22 (168,169)
|
5
|
|
| |
Abstract:
The public at large, many policymakers, and some economists hold views of social welfare that attach some importance to factors other than individuals' utilities. This note shows that any such non-individualistic notion of social welfare conflicts with the Pareto principle.
|
|
|
45.
|
|
Utility from Accumulation
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
20 Dec 09
|
|
Last Revised:
|
|
31 Dec 09
|
|
20 (173,884) |
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
22 Dec 09
|
|
Last Revised:
|
|
22 Dec 09
|
|
8
|
|
|
| |
Abstract:
The possibility that individuals may derive utility from the mere fact of holding wealth has long been recognized. A simple intertemporal model featuring utility from accumulation is used here to examine consumption and savings, the choice between inter vivos gifts and bequests (both to descendants and to charities), and levels of annuitization. Introducing utility from accumulation helps to explain a number of empirical regularities that otherwise seem inconsistent with optimizing behavior. Moreover, because individuals who derive significant utility from accumulation will tend to save more and, in the long run, give more than others do, this source of utility may be especially important in analyzing savings behavior, gifts and bequests, and charitable contributions.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
20 Dec 09
|
|
Last Revised:
|
|
31 Dec 09
|
|
12
|
|
|
| |
Abstract:
The possibility that individuals may derive utility from the mere fact of holding wealth has long been recognized. A simple intertemporal model featuring utility from accumulation is used here to examine consumption and savings, the choice between inter vivos gifts and bequests (both to descendants and to charities), and levels of annuitization. Introducing utility from accumulation helps to explain a number of empirical regularities that otherwise seem inconsistent with optimizing behavior. Moreover, because individuals who derive significant utility from accumulation will tend to save more and, in the long run, give more than others do, this source of utility may be especially important in analyzing savings behavior, gifts and bequests, and charitable contributions.
annuities, behavioral public finance, bequests, consumption, charitable giving, gifts, savings, wealth
|
|
|
|
|
|
46.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
28 Dec 06
|
|
Last Revised:
|
|
30 Dec 06
|
|
20 (173,884)
|
33
|
|
| |
Abstract:
No abstract is available for this paper.
|
|
|
47.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
16 Jul 04
|
|
Last Revised:
|
|
17 Apr 08
|
|
18 (179,773)
|
12
|
|
| |
Abstract:
Even when society would wish to deter all acts of some type, such as tax evasion and many common crimes, the benefits from deterrence often will be insufficient to justify the expenditures on enforcement that would be required to deter everyone. If some individuals are not deterred, however, they will bear risk when fines are employed as a sanction. As a result, it may be optimal to reduce total risk-bearing costs by reducing the number of individuals who bear any risk. This can be accomplished by increasing enforcement above the level that would be justified considering only the benefits of deterrence and the direct costs of enforcement. Another possibility is that it may be optimal reduce the risk borne by those who act, by employing fines below the maximum feasible level. This latter result constitutes an instance in which the well-known implication of Becker's analysis that it is optimal to employ extreme sanctions for all offenses is invalid.
|
|
|
48.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
26 May 04
|
|
Last Revised:
|
|
26 May 04
|
|
18 (179,773)
|
16
|
|
| |
Abstract:
No abstract is available for this paper.
|
|
|
49.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
23 May 01
|
|
Last Revised:
|
|
23 May 01
|
|
16 (185,633)
|
1
|
|
| |
Abstract:
null
|
|
|
50.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
08 Jul 00
|
|
Last Revised:
|
|
08 Jul 00
|
|
16 (185,633)
|
11
|
|
| |
Abstract:
Altruistically motivated gifts involve a species of consumption externality. Donors obtain an altruistic benefit from the effect of their gifts on donees' utility but do not take into account that the benefit to donees is itself relevant to social welfare. The level of gift-giving thus will be lower than is optimal. A subsidy can correct this problem, while compulsory transfers (assuming the state lacks information about who is altruistic) and bargaining between donors and donees cannot. The rationale for subsidizing gifts offered here does not depend on whether the donee's activity is a public good (as with gifts for medical research) or whether the transfer tends to equalize the wealth of donors and donees -- factors emphasized in the existing literature on the subject.
|
|
|
51.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
28 Dec 06
|
|
Last Revised:
|
|
30 Dec 06
|
|
14 (191,570)
|
31
|
|
| |
Abstract:
No abstract is available for this paper.
|
|
|
52.
|
|
|
Lucian A. Bebchuk Harvard University - Harvard Law School Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
10 Jul 07
|
|
Last Revised:
|
|
10 Jul 07
|
|
12 (197,540)
|
|
|
| |
Abstract:
No abstract is available for this paper.
|
|
|
53.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
14 Apr 07
|
|
Last Revised:
|
|
14 Apr 07
|
|
12 (197,540)
|
4
|
|
| |
Abstract:
Much legal advice is provided after individuals have committed acts - when they come before a tribunal - rather than at the time they decide how to act. This paper considers the effects and social desirability of such legal advice. It is emphasized that 1egl advice tends to reduce expected sanctions, which may encourage acts subject to sanctions. There is, however, no a priort basis for believing that this is socially undesirable, because, among other reasons, it may be possible to raise the level of sanctions to offset their dilution due to legal advice. In addition, legal advice has no general tendency to improve the effectiveness of the legal system through its influence on the information presented to tribunals.
|
|
|
54.
|
|
|
Lucian A. Bebchuk Harvard University - Harvard Law School Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
27 Sep 01
|
|
Last Revised:
|
|
09 Jan 02
|
|
12 (197,540)
|
13
|
|
| |
Abstract:
This paper considers optimal enforcement when individuals may be imperfectly informed about the probability of apprehension. When individuals are perfectly informed, optimal sanctions are maximal because, as Gary Becker (1968) suggested, society can economize on enforcement resources by reducing the probability of apprehension while increasing sanctions. But when individuals imperfectly observe the probability of apprehension, it may be optimal to apply lower sanctions while expending more enforcement resources.
|
|
|
55.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
12 Jul 00
|
|
Last Revised:
|
|
12 Jul 00
|
|
12 (197,540)
|
3
|
|
| |
Abstract:
The federal income tax and major welfare programs do not take into account significant cost-of-living variations among regions. This article considers what adjustments might be appropriate in light of the distributive purposes of tax and welfare systems and concerns about the efficiency of the interregional allocation of resources. Price index problems, differences in amenities, and heterogeneity of individuals' locational preferences are considered.
|
|
|
56.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
24 Jul 07
|
|
Last Revised:
|
|
24 Jul 07
|
|
11 (200,656)
|
|
|
| |
Abstract:
Does taxation for public goods generally involve a distortionary cost? Are Pigouvian taxes desirable because they raise revenue without having to resort to distortionary taxes? Should decisions concerning public goods or Pigouvian taxes depend on whether their incidence is regressive? The answer to these questions may be negative, contrary to conventional wisdom, if one considers a different and arguably more natural method of achieving budget balance than is typically assumed.
|
|
|
57.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
27 Dec 06
|
|
Last Revised:
|
|
27 Dec 06
|
|
11 (200,656)
|
20
|
|
| |
Abstract:
No abstract is available for this paper.
|
|
|
58.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
10 Jul 07
|
|
Last Revised:
|
|
10 Jul 07
|
|
10 (203,524)
|
5
|
|
| |
Abstract:
No abstract is available for this paper.
|
|
|
59.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
14 Apr 07
|
|
Last Revised:
|
|
18 Dec 07
|
|
10 (203,524)
|
4
|
|
| |
Abstract:
A significant source of risk arises from uncertainty concerning future government policy. Government action - tax reform, deregulation, judicial decisions, budgetary shifts - produces gains and losses for those who invested under preexisting rules. The effects of government relief - compensation, grandfathering, phase-ins - on ex ante incentives and risk bearing are examined in a model in which private insurance is taken into account. It is demonstrated that government relief is inefficient, even when private insurance is subject to moral hazard, because relief shields individuals from some of the effects of their actions.
|
|
|
60.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
14 Apr 07
|
|
Last Revised:
|
|
14 Apr 07
|
|
10 (203,524)
|
11
|
|
| |
Abstract:
Government relief is offered for a wide range of risks - natural disaster, economic dislocation, sickness and injury. This paper explores the effect of such relief on incentives and the allocation of risk in a model with private insurance. It is shown that government relief is inefficient, even when its level is less than the private insurance coverage that individuals would otherwise have purchased and even when private insurance coverage is incomplete due to problems of moral hazard.
|
|
|
61.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
11 Jun 00
|
|
Last Revised:
|
|
11 Jun 00
|
|
10 (203,524)
|
1
|
|
| |
Abstract:
This paper considers the optimal tax treatment of voluntary transfers to individuals in a" framework that integrates redistributive income taxation and estate and gift taxation. Under this" formulation, redistributive considerations become secondary. The optimal tax treatment of" transfers depends upon the differences between expenditures on transfers and ordinary personal" consumption. It turns out that some types of transfers confer a sort of positive externality on" donees, some create tax revenue externalities, and some affect donors' and donees' marginal" utilities of income in a manner relevant to the optimal taxation problem. Different types of" transfers have qualitatively different effects.
|
|
|
62.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
10 Jul 07
|
|
Last Revised:
|
|
20 Jan 09
|
|
6 (213,489)
|
5
|
|
| |
Abstract:
No abstract is available for this paper.
|
|
|
63.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
24 Jul 07
|
|
Last Revised:
|
|
24 Jul 07
|
|
5 (215,707)
|
9
|
|
| |
Abstract:
No abstract is available for this paper.
|
|
|
64.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
18 Jan 10
|
|
Last Revised:
|
|
18 Jan 10
|
|
0 (0)
|
|
|
| |
Abstract:
Substantial evidence suggests that savings behavior may depart from neoclassical optimization. This article examines the implications of raising the savings rate – whether through social security, retirement plans, or otherwise – for labor supply, where labor supply is determined by behavioral utility functions that reflect the non-neoclassical character of savings behavior. Under one formulation, raising the targeted savings rate has the same effect on labor supply as that of raising the labor income tax rate; under a second, raising the targeted savings rate has no effect on labor supply; and under a third, raising the targeted savings rate increases labor supply regardless of the slope of the labor supply curve. Effects on labor supply are particularly consequential because of the significant preexisting distortion due to labor income taxation.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
|
|
|
65.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
20 Dec 07
|
|
Last Revised:
|
|
11 Jan 08
|
|
0 (0)
|
|
|
| |
Abstract:
How should moral sanctions and moral rewards - the moral sentiments involving feelings of guilt and of virtue - be employed to govern individuals' behavior if the objective is to maximize social welfare? In the model that we examine, guilt is a disincentive to act and virtue is an incentive because we assume that they are negative and positive sources of utility. We also suppose that guilt and virtue are costly to inculcate and are subject to certain constraints on their use. We show that the moral sentiments should be used chiefly to control externalities and further that guilt is best to employ when most harmful acts can successfully be deterred whereas virtue is best when only a few individuals can be induced to behave well. We also contrast the optimal use of guilt and virtue to optimal Pigouvian taxation and discuss extensions of our analysis.
|
|
|
66.
|
|
|
Louis Kaplow Harvard University - Harvard Law School Steven Shavell Harvard Law School
|
| Posted: |
|
20 Apr 99
|
|
Last Revised:
|
|
06 Jun 01
|
|
0 (0)
|
|
|
| |
Abstract:
The public at large, many policymakers, and a number of economists hold views of social welfare that are non-welfarist, which is to say that some importance is attached to factors other than individuals' utilities. We show, however, that any non-welfarist method of policy assessment violates the Pareto principle.
|
|
|
67.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
29 Aug 98
|
|
Last Revised:
|
|
14 Mar 08
|
|
0 (0)
|
|
|
| |
Abstract:
Legal rules often are complex in order to distinguish different types of behavior that may have different consequences. Greater complexity thus allows better control of behavior. But more complex rules are more costly for individuals to understand ex ante and for a court to apply ex post. Also because of the cost, some individuals will choose not to learn complex rules. This article models the effects of complexity on individuals' decisions to acquire information, choices about whether to act, and reports of their actions to an enforcement authority. It determines when more complex rules improve welfare and how this depends on whether enforcement involves self-reporting of behavior.
|
|
|
68.
|
|
A Note on the Optimal Supply of Public Goods and the Distortionary Cost of Taxation
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
21 Aug 98
|
|
Last Revised:
|
|
11 Oct 98
|
|
0 (227,185) |
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
24 Sep 98
|
|
Last Revised:
|
|
11 Oct 98
|
|
0
|
|
|
| |
Abstract:
In a recent article, I demonstrated that, under standard simplifying assumptions, it is possible to finance a public good in a manner such that a Pareto improvement results whenever the simple cost-benefit test is satisfied -- that is, without any adjustment for the "marginal cost of funds." In particular, the method of finance involves adjusting the income tax so that the combined incidence of the tax adjustment and the public good is distribution neutral. One implication of this result is that, if the public good is financed in some other manner, the difference in outcome will be purely redistributive, so that any change in distortionary costs will be accompanied by an opposing change in redistributive benefits. I also showed how this analysis is applicable to determining the optimal level of environmental taxes. Edgar Browning and Liqun Liu have written a critique of my article. It does not, however, disagree with any of these claims. Instead, their argument focuses on how one should interpret the term "distortion." It should not be surprising, however, that under any interpretation of the term -- including their preferred one -- my conclusions about how policy analysis should be conducted continue to be correct.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
21 Aug 98
|
|
Last Revised:
|
|
28 Sep 98
|
|
0
|
|
|
| |
Abstract:
In a recent article, I demonstrated that, under standard simplifying assumptions, it is possible to finance a public good in a manner such that a Pareto improvement results whenever the simple cost-benefit test is satisfied -- that is, without any adjustment for the "marginal cost of funds." In particular, the method of finance involves adjusting the income tax so that the combined incidence of the tax adjustment and the public good is distribution neutral. One implication of this result is that, if the public good is financed in some other manner, the difference in outcome will be purely redistributive, so that any change in distortionary costs will be accompanied by an opposing change in redistributive benefits. I also showed how this analysis is applicable to determining the optimal level of environmental taxes. Edgar Browning and Liqun Liu have written a critique of my article. It does not, however, disagree with any of these claims. Instead, their argument focuses on how one should interpret the term "distortion." It should not be surprising, however, that under any interpretation of the term -- including their preferred one -- my conclusions about how policy analysis should be conducted continue to be correct.
|
|
|
|
|
|
69.
|
|
|
Lucian A. Bebchuk Harvard University - Harvard Law School Louis Kaplow Harvard University - Harvard Law School Jesse M. Fried Harvard Law School
|
| Posted: |
|
05 Sep 97
|
|
Last Revised:
|
|
10 Nov 08
|
|
0 (0)
|
|
|
| |
Abstract:
In Israel, as in a number of other economies, a few large banks have historically played a major role in the nonfinancial sector. At the end of 1995, the Israeli government appointed the Brodet Committee to examine bank investments in nonfinancial corporations. The Israeli Knesset subsequently adopted the committee's recommendations and imposed major limitations on the role of banks in the nonfinancial sector. These limitations required the two biggest Israeli banks to start selling much of their nonfinancial investments.This paper is based on the research report that we prepared for the Brodet Committee at the request of the Israeli Finance Ministry and Antitrust Authority. We explain why we recommended to the Committee that substantial limitations be imposed on bank investment in nonfinancial companies. We provide a detailed analysis of the effects that bank- conglomerate combinations have in a small economy -- such as Israel's -- that is characterized by a great deal of concentration in both the financial and nonfinancial sectors. In particular, we analyze the effects that bank-conglomerate combinations have on the safety and soundness of banks, on the decisions of the investment funds managed by banks, and on the level of competition in the economy in both the short run and the long run.
|
|
|
70.
|
|
General Characteristics of Rules
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
30 Nov 96
|
|
Last Revised:
|
|
14 Jul 98
|
|
0 (227,185) |
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
14 Mar 97
|
|
Last Revised:
|
|
14 Jul 98
|
|
0
|
|
|
| |
Abstract:
This entry addresses two fundamental characteristics of rules. The first concerns the degree of precision, detail, or complexity they embody: how finely are different sorts of behavior to be distinguished? A second aspect of legal commands concerns when a given level of detail is provided -- at the time of promulgation ("rules") or subsequent to individuals' actions, in the context of an adjudication ("standards"). These aspects of rules are considered from a perspective that focuses upon information costs and dissemination: different sorts of legal commands involve differing costs of formulation and application by private parties (deciding upon their own conduct) and adjudicators, and the character of laws also influences how well parties actually will understand the law and conform their conduct accordingly. The discussion encompasses related questions involving the role of precedent, the evolution of the law over time, legal uncertainly, and accuracy in adjudication. This entry also addresses the separate problem of how changes in legal rules should apply to prior behavior or pre-existing investments -- issues of retroactivity and transition.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
30 Nov 96
|
|
Last Revised:
|
|
30 Jan 98
|
|
0
|
|
|
| |
Abstract:
This entry addresses two fundamental characteristics of rules. The first concerns the degree of precision, detail, or complexity they embody: how finely are different sorts of behavior to be distinguished? A second aspect of legal commands concerns *when* a given level of detail is provided -- at the time of promulgation ("rules") or subsequent to individuals' actions, in the context of an adjudication ("standards"). These aspects of rules are considered from a perspective that focuses upon information costs and dissemination: different sorts of legal commands involve differing costs of formulation and application by private parties (deciding upon their own conduct) and adjudicators, and the character of laws also influences how well parties actually will understand the law and conform their conduct accordingly. The discussion encompasses related questions involving the role of precedent, the evolution of the law over time, legal uncertainty, and accuracy in adjudication. This entry also addresses the separate problem of how changes in legal rules should apply to prior behavior or pre-existing investments -- issues of retroactivity and transition.
|
|
|
|
|
|
71.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
22 Jan 97
|
|
Last Revised:
|
|
12 Apr 98
|
|
0 (0)
|
|
|
| |
Abstract:
In two recent articles, I explore the conceptual question of how human capital would be treated under a pure, comprehensive, accrual income tax, pursuing the analogy to accrual treatment of physical and financial capital, which has received much academic attention. My central conclusion is that conventional income tax treatment of human capital -- taxing wages when earned -- is close to the treatment required by a pure consumption tax, whereas accrual income tax treatment would be quite different from that in existing income tax systems.Professor Zelenak's article largely agrees with my central claims. Much of his article is concerned with criticizing me for advocating a consumption tax, which I do not in fact do. Indeed, I castigate the very type of argument he attempts to attribute to me and relies upon in defending his own views. It is also the case that Zelenak's affirmative arguments for the existing hybrid income/consumption tax and his various objections to particular elements of my analysis are largely without foundation.
|
|
|
72.
|
|
Accuracy in Adjudication
|
Show Abstracts |
Hide Abstracts |
Versions (2)
|
hide multiple versions |
Export Bibliographic Info |
|
Louis Kaplow Harvard University - Harvard Law School
|
|
Posted:
|
|
07 Jan 97
|
|
Last Revised:
|
|
22 Nov 04
|
|
0 (227,185) |
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
14 Feb 97
|
|
Last Revised:
|
|
15 Feb 01
|
|
0
|
|
|
| |
Abstract:
Many features of public legal systems and private schemes of dispute resolution influence the accuracy of legal outcomes, including rules of procedure and evidence, appeals, regulation of lawyers' conduct, and some aspects of substantive law. An economic inquiry into this subject is concerned with the trade-off between accuracy and cost. Much of the effort involves careful specification of the value of accuracy and cost. Much of the effort involves careful specification of the value of accuracy, which until recently has been largely taken for granted. It turns out that the benefits from greater accuracy vary greatly by context. Accordingly, the discussion separately considers problems of determining liability, assessing damages, and establishing future rights and obligations.
|
|
|
|
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
07 Jan 97
|
|
Last Revised:
|
|
22 Nov 04
|
|
0
|
|
|
| |
Abstract:
Many features of public legal systems and private schemes of dispute resolution influence the accuracy of legal outcomes, including rules of procedure and evidence, appeals, regulation of lawyers' conduct, and some aspects of substantive law. An economic inquiry into this subject is concerned with the trade-off between accuracy and cost. Much of the effort involves careful specification of the value of accuracy, which until recently has been largely taken for granted. It turns out that the benefits from greater accuracy vary greatly by context. Accordingly, the discussion separately considers problems of determining liability, assessing damages, and establishing future rights and obligations.
|
|
|
|
|
|
73.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
02 Dec 96
|
|
Last Revised:
|
|
18 Jun 98
|
|
0 (0)
|
|
|
| |
Abstract:
A substantial majority of all capital is human capital, and most revenue from the income tax is from returns on human capital, wage income. Nevertheless, work analyzing the comprehensive, accrual ("ideal") income taxation of capital has focused on physical and financial capital. Applying the learning from this work to human capital suggests that human capital is significantly undertaxed under a conventional income tax, the actual result being close to what would be appropriate under a wage or consumption tax. This undertaxation does not, however, directly alter the marginal return to investments in human capital, although it does affect intertemporal behavior and bear on the interpretation of arguments about whether income is a distributively appealing base for taxation.
|
|
|
74.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
21 Oct 96
|
|
Last Revised:
|
|
14 Feb 01
|
|
0 (0)
|
|
|
| |
Abstract:
Income tax burdens, welfare payments, and social security benefits depend on the composition of family units. Substantial controversy exists over the appropriate forms of adjustment, as reflected by the wide variation in methods among programs, across jurisdictions, and over time. In contrast to approaches based on "ability to pay" or equivalence scales, this article uses a utilitarian welfare function to derive the equitable distribution of income for different family configurations. The analysis considers how allocations should depend on family sharing arrangements, economies of scale, altruism among family members, and differences in utility functions among family members.
|
|
|
75.
|
|
|
Louis Kaplow Harvard University - Harvard Law School
|
| Posted: |
|
15 Oct 96
|
|
Last Revised:
|
|
26 Mar 98
|
|
0 (0)
|
|
|
| |
Abstract:
The conventional view of economists is that the optimal supply of public goods must directly take into account the cost of financing them with distortionary taxes, notably the income tax. However, this article demonstrates, under standard simplifying assumptions, that it is possible to finance a public good in a manner that results in no additional distortion by using an adjustment to the income tax that offsets the benefits of the public good. In this case, it is optimal to supply the public good whenever the simple cost-benefit test is satisfied. The article also shows that if a different tax adjustment is made, the difference in outcome will be purely redistributive; thus, any change in distortionary costs will be accompanied by an opposing change in redistributive benefits. In this case, the cost-benefit test should be modified to reflect both of these changes. Finally, it is explained that the present analysis is fully applicable to determining the optimal level of environmental taxes.
|
|