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

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

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dc.contributor.author Shavell, Steven
dc.date.accessioned 2010-07-31T00:02:32Z
dc.date.issued 2010
dc.identifier.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) en_US
dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:4322593
dc.description.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. en_US
dc.language.iso en_US en_US
dash.license LAA
dc.subject law and economics en_US
dc.subject olin center en_US
dc.subject no. 672 en_US
dc.subject faculty discussion paper en_US
dc.title The Corrective Tax Versus Liability As Solutions to the Problem of Harmful Externalities en_US
dc.type Research Paper or Report en_US
dc.description.version Author's Original en_US
dash.depositing.author Shavell, Steven
dc.date.available 2010-07-31T00:02:32Z

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