Taxation, Fines, and Producer Liability Rules: Efficiency and Market Structure Implications
AbstractThis paper analyzes the comparative efficiency of producer liability rules and regulatory policy in short-run and long-run competitive equilibria with endogenous product safety. Pigouvian taxes on output and safety provision fail to achieve the long-run social optimum. An appropriately designed policy involving fines on accidents and subsidies on safety provision achieves efficiency; however, the optimal policy may involve the taxation, not the subsidization, of product safety. Tort liability also leads to efficient outcomes but may be associated with perverse structural changes. For example, increased liability exposure may induce de novo entry in hazardous sectors, even with fully capitalized firms.
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Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 65 (1998)
Issue (Month): 1 (July)
Other versions of this item:
- Hamilton, Stephen F., 1998. "Taxation, Fines, And Producer Liability Rules: Efficiency And Market Structure Implications," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20928, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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