The Determinants of State-Level Caps on Punitive Damages: Theory and Evidence
AbstractUnder the standard economic model of torts, punitive damages correct for imperfect detection. Incorporating litigation costs into the model provides a justification for punitive damage caps. At the optimum, caps balance deterrence against the cost of litigation. Empirical testing of the model is performed via Cox proportional and parametric hazard analyses, using a panel dataset from 1981 to 2007. The results reveal a positive relationship between judicial and legal expenditures (a proxy for legal costs) and cap enactment, and a negative relationship between state GSP (a proxy for damages) and cap enactment. Cap enactment is also influenced by political ideology.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2010-25.
Length: 35 pages
Date of creation: Oct 2010
Date of revision:
Note: We acknowledge the helpful advice of Stephen Ross and the comments of participants at the Department of Economics Brownbag, University of Connecticut, November 2009.
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Deterrence; litigation costs; punitive damages; statutory caps;
Other versions of this item:
- Thomas J. Miceli & Michael P. Stone, 2013. "The Determinants Of State-Level Caps On Punitive Damages: Theory And Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 31(1), pages 110-125, 01.
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
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