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The Determinants Of State-Level Caps On Punitive Damages: Theory And Evidence

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  • THOMAS J. MICELI
  • MICHAEL P. STONE

Abstract

Under 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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Suggested Citation

  • 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, January.
  • Handle: RePEc:bla:coecpo:v:31:y:2013:i:1:p:110-125
    DOI: j.1465-7287.2011.00297.x
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    File URL: http://hdl.handle.net/10.1111/j.1465-7287.2011.00297.x
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    References listed on IDEAS

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    1. Paul H. Rubin & Joanna M. Shepherd, 2007. "Tort Reform and Accidental Deaths," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 221-238.
    2. Joni Hersch & W. Kip Viscusi, 2004. "Punitive Damages: How Judges and Juries Perform," The Journal of Legal Studies, University of Chicago Press, vol. 33(1), pages 1-36, January.
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    5. Danzon, Patricia, 1984. "The Frequency and Severity of Medical Malpractice Claims," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 115-148, April.
    6. Anupam Nanda, 2008. "Property Condition Disclosure Law: Why Did States Mandate ‘Seller Tell All’?," The Journal of Real Estate Finance and Economics, Springer, vol. 37(2), pages 131-146, August.
    7. Eisenberg, Theodore & Goerdt, John & Ostrom, Brian & Rottman, David & Wells, Martin T, 1997. "The Predictability of Punitive Damages," The Journal of Legal Studies, University of Chicago Press, vol. 26(2), pages 623-661, June.
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    Cited by:

    1. Matter, Ulrich & Stutzer, Alois, 2015. "Politico-economic determinants of tort reforms in medical malpractice," Working papers 2015/02, Faculty of Business and Economics - University of Basel.
    2. Matter, Ulrich & Stutzer, Alois, 2014. "The Role of Lawyer-Legislators in Shaping the Law: Evidence from Voting Behavior on Tort Reforms," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100452, Verein für Socialpolitik / German Economic Association.
    3. Matter, Ulrich & Stutzer, Alois, 2016. "The role of party politics in medical malpractice tort reforms," European Journal of Political Economy, Elsevier, vol. 42(C), pages 17-35.
    4. Matter, Ulrich & Stutzer, Alois, 2013. "Do Lawyer-Legislators Protect Their Business? Evidence from Voting Behavior on Tort Reforms," Working papers 2013/09, Faculty of Business and Economics - University of Basel.

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    More about this item

    JEL classification:

    • 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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