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The Causes and Effects of Liability Reform: Some Empirical Evidence

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  • Thomas J. Campbell
  • Daniel P. Kessler
  • George B. Shepherd
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    Abstract

    We provide empirical evidence both on the causes and the effects of liability reforms. Using a newly collected data set of state tort laws and a panel data set containing industry-level data by state for the years 1969-1990, we (1) identify the characteristics of states that are associated with liability reforms and (2) examine whether liability reforms influence productivity and employment. We present two central findings. First, reductions in liability levels are associated with increases in measured productivity and employment in most industries that we studied. Second, liability reforms that reduce legal liability are generally positively correlated with measures of political conservatism.

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    File URL: http://www.nber.org/papers/w4989.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4989.

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    Date of creation: Jan 1995
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    Handle: RePEc:nbr:nberwo:4989

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    1. Danzon, Patricia, 1984. "The Frequency and Severity of Medical Malpractice Claims," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 115-48, April.
    2. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May.
    3. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
    4. Carlino, Gerald A. & Voith, Richard, 1992. "Accounting for differences in aggregate state productivity," Regional Science and Urban Economics, Elsevier, vol. 22(4), pages 597-617, November.
    5. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    6. Epstein, Richard A, 1988. "The Political Economy of Product Liability Reform," American Economic Review, American Economic Association, vol. 78(2), pages 311-15, May.
    7. repec:fth:stanho:e-93-6 is not listed on IDEAS
    8. Patricia Beeson & Stephen Husted, 1986. "Patterns and determinants of inefficiency in state manufacturing," Working Paper 8603, Federal Reserve Bank of Cleveland.
    9. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
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