If Art is Resold, Should the Artist Profit?

Abstract

This paper analyzes the market adjustments to pending Federal legislation that would impose mandatory royalties on resales of works of fine art. The pending legislation is ostensibly motivated to confer economic benefits on artists who have not yet established themselves in the market. An important provision of the legislation is that it forbids the artist to waive his right to the re-sale royalty. The paper conducts a partial equilibrium welfare analysis to measure the allocative effects of the statute. Three propositions are established that demonstrate that the pending legislation will induce a net welfare loss as well as effect a redistribution of income from artists to a subset of purchasers. The policy implication of the proposition is that if the pending legislation is enacted, it will pervert the legislative intent.