Abstract

http://ssrn.com/abstract=874193
 
 

Citations



 


 



On the Superiority of Corrective Taxes to Quantity Regulation


Louis Kaplow


Harvard Law School; National Bureau of Economic Research (NBER)

Steven Shavell


Harvard Law School; National Bureau of Economic Research (NBER)


American Law and Economics Review, Vol. 4, No. 1, pp. 1-17, 2002

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.

Accepted Paper Series





Not Available For Download

Date posted: February 29, 2008  

Suggested Citation

Kaplow, Louis and Shavell, Steven, On the Superiority of Corrective Taxes to Quantity Regulation. American Law and Economics Review, Vol. 4, No. 1, pp. 1-17, 2002. Available at SSRN: http://ssrn.com/abstract=874193

Contact Information

Louis Kaplow (Contact Author)
Harvard Law School ( email )
1575 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-4101 (Phone)
617-496-4880 (Fax)
HOME PAGE: http://www.law.harvard.edu/faculty/directory/facdir.php?id=32&show=bibliography
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Steven Shavell
Harvard Law School ( email )
1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-495-3668 (Phone)
617-496-2256 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 674

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.250 seconds