The Law and Economics of Redistribution
26 Pages Posted: 27 Nov 2017 Last revised: 10 May 2018
Date Written: November 21, 2017
Should legal rules be used to redistribute income? Or should income taxation be the exclusive means for reducing income inequality? This article reviews the legal scholarship on this question. First, it traces how the most widely-cited argument in favor of using taxes exclusively — Kaplow & Shavell’s (1994) “double-distortion” argument — evolved from previous debates about whether legal rules could even be redistributive and whether law and economics should be concerned exclusively with efficiency or with distribution as well. Next, it surveys the responses to the double-distortion argument. These responses appear to have had only limited success in challenging the sturdy reputation of the double-distortion argument. Finally, it concludes by highlighting new directions in a debate revived by increasing economic inequality.
Keywords: Inequality, Redistribution, Legal Rules, Taxation, Efficiency, Equity, Social Welfare
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