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Market failure, inequality and redistribution

Author

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  • Dufour , Jean-Marie

    (McGill University)

Abstract

We consider the following question: does market failure justify redistribution? We argue that the general answer to this question is no, in the sense that policies for correcting market failures do not aim at producing a "desirable" income distribution. This follows from the fact that, by construction, market failure is a deviation from "efficiency" that does not involve any notion of a desirable distribution of welfare (or income). However, there are special cases where a "corrective measure" involving redistribution can offset a market failure, so this can provide a form of efficiency-based justification for redistribution.

Suggested Citation

  • Dufour , Jean-Marie, 2008. "Market failure, inequality and redistribution," Ethics and Economics, CREUM, Université de Montréal, vol. 6(1), pages 1-9.
    • Handle: RePEc:ris:etheco:0016
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    More about this item

    Keywords

    positive economics; normative economics; welfare economics; market failure; externality; taxation; social choice; public choice.;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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