The Corrective Tax Versus Liability As Solutions to the Problem of Harmful Externalities

DSpace/Manakin Repository

The Corrective Tax Versus Liability As Solutions to the Problem of Harmful Externalities

Citable link to this page

. . . . . .

Title: The Corrective Tax Versus Liability As Solutions to the Problem of Harmful Externalities
Author: Shavell, Steven
Citation: Steven Shavell, The Corrective Tax versus Liability As Solutions to the Problem of Harmful Externalities (Harvard John M. Olin Center for Law, Economics and Business, Discussion Paper No. 672, 2010)
Full Text & Related Files:
Abstract: Although the corrective tax has long been viewed by economists as a theoretically desirable remedy for the problem of harmful externalities, its actual use has been limited, mainly to the domain of pollution. Liability, in contrast, has great importance in controlling harmful externalities. I compare the tax and liability here in theory and suggest that the conclusions help to explain the observed predominance of liability over taxation, except in the area of pollution. The following factors are emphasized in the analysis: inefficiency of incentives under taxes when, as would be typical, it would be impractical for the state to incorporate into taxes all of the variables that significantly affect expected harm; efficiency of incentives under strict liability, which requires only that actual harms be measured; efficiency of incentives to exercise precautions under the negligence rule; administrative cost advantages of liability deriving from its being applied only when harm occurs; and dilution of incentives under liability when suit would be unlikely or injurers would not be able to pay fully for harms caused.
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4322593

Show full Dublin Core record

This item appears in the following Collection(s)

 
 

Search DASH


Advanced Search
 
 

Submitters