The Efficiency of the Legal System Versus the Income Tax in Redistributing Income
21 Pages Posted: 23 May 2001 Last revised: 7 Sep 2022
Date Written: September 1993
Abstract
Should legal rules be chosen only on the basis of their efficiency or also on the basis of their distributional effects? This article demonstrates that redistribution accomplished through legal rules is systematically less efficient than redistribution accomplished through the income tax system -- even though the latter distorts incentives to work. In particular. a regime with an inefficient legal rule can be replaced by a regime with an efficient legal rule and a modified income tax system designed so that every person is made better off.
Suggested Citation: Suggested Citation
Kaplow, Louis and Shavell, Steven, The Efficiency of the Legal System Versus the Income Tax in Redistributing Income (September 1993). NBER Working Paper No. w4457, Available at SSRN: https://ssrn.com/abstract=227307
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