The Efficiency of the Legal System Versus the Income Tax in Redistributing Income

21 Pages Posted: 23 May 2001 Last revised: 13 Sep 2010

See all articles by Louis Kaplow

Louis Kaplow

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

Steven Shavell

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

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

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

Louis Kaplow (Contact Author)

Harvard Law School ( email )

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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

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