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


  • Louis Kaplow
  • Steven Shavell


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

  • Louis Kaplow & Steven Shavell, 1993. "The Efficiency of the Legal System versus the Income Tax in Redistributing Income," NBER Working Papers 4457, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4457
    Note: LE

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    References listed on IDEAS

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    6. Fernandez, Raquel & Rogerson, Richard, 1997. "Keeping People Out: Income Distribution, Zoning, and the Quality of Public Education," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 23-42, February.
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    9. David E. Wildasin, 1993. "State income taxation with mobile labor," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 51-75.
    10. Cassidy, Glenn & Epple, Dennis & Romer, Thomas, 1989. "Redistribution by local governments in a monocentric urban area," Regional Science and Urban Economics, Elsevier, vol. 19(3), pages 421-454, August.
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    12. Wallace E. Oates, 1968. "The Theory of Public Finance in a Federal System," Canadian Journal of Economics, Canadian Economics Association, vol. 1(1), pages 37-54, February.
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    More about this item

    JEL classification:

    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General


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