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. 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.