Corrective taxation versus liability
By: Steven Shavell
Contributors: John M. Olin Center for Law, Economics, and Business
Series: Discussion paper -- no. 671; Discussion paper (John M. Olin Center for Law, Economics, and Business : Online) -- no. 671.
Publisher: Harvard Law School
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Abstract: Taxation and liability are compared here as means of controlling harmful externalities.  It is emphasized that liability has an advantage over taxation: inefficiency of incentives arises under taxation when, as would be typical, it would be impractical for a tax to reflect all variables that significantly affect expected harm, whereas efficiency of incentives under liability does not require the state to determine expected harm -- it requires only that injurers pay for harm that occurs.  However, taxation enjoys an advantage over liability: incentives under liability are diluted to the degree that injurers might escape suit.  The optimal joint use of taxation and liability is also examined, and it is shown that liability should be employed fully because liability creates more efficient incentives than taxation; a tax should be used only to take up the slack due to thepossibility that suit for harm would not be brought"--John M. Olin Center for Law, Economics, and Business web site.
Notes: Title from PDF file as viewed on 8/20/2010.

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