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On the joint use of licensing and liability


  • Lenntorp, Erik


Licensing is a widely used technique applied to impose regulations. Firms inducing harm must hold a license issued by a regulatory agency on a case-by-case basis. A firm may also be subject to liability. This paper studies the implications on social welfare of combining licensing with strict liability. Contributions include the study of a joint use and related administrative costs. The latter include costs pertaining to litigation and the issuing and enforcing of licenses. It is established when a joint use is motivated. Regulatory compliance should protect from liability in order to decrease litigation and enforcement costs and associated distortions.

Suggested Citation

  • Lenntorp, Erik, 2009. "On the joint use of licensing and liability," International Review of Law and Economics, Elsevier, vol. 29(3), pages 244-251, September.
  • Handle: RePEc:eee:irlaec:v:29:y:2009:i:3:p:244-251

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    References listed on IDEAS

    1. Viscusi, W Kip, 1988. "Product Liability and Regulation: Establishing the Appropriate Institutional Division of Labor," American Economic Review, American Economic Association, vol. 78(2), pages 300-304, May.
    2. Schmitz, Patrick W., 2000. "On the joint use of liability and safety regulation," International Review of Law and Economics, Elsevier, vol. 20(3), pages 371-382, September.
    3. Hiriart, Yolande & Martimort, David & Pouyet, Jerome, 2004. "On the optimal use of ex ante regulation and ex post liability," Economics Letters, Elsevier, vol. 84(2), pages 231-235, August.
    4. Decker, Christopher S, 2003. "Corporate Environmentalism and Environmental Statutory Permitting," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 103-129, April.
    5. Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
    6. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-1097, September.
    7. Calcott, Paul & Hutton, Stephen, 2006. "The choice of a liability regime when there is a regulatory gatekeeper," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 153-164, March.
    8. Burrows, Paul, 1999. "Combining regulation and legal liability for the control of external costs," International Review of Law and Economics, Elsevier, vol. 19(2), pages 227-244, June.
    9. Rose-Ackerman, Susan, 1991. "Regulation and the Law of Torts," American Economic Review, American Economic Association, vol. 81(2), pages 54-58, May.
    10. Innes, Robert, 2004. "Enforcement costs, optimal sanctions, and the choice between ex-post liability and ex-ante regulation," International Review of Law and Economics, Elsevier, vol. 24(1), pages 29-48, March.
    11. Erik Lenntorp, 2008. "Hell or High Water? An Economic Analysis of the Swedish Institutions for Flood Risk Management," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(2), pages 323-336, April.
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    Cited by:

    1. Andrzej Baniak & Peter Grajzl, 2014. "Controlling Product Risks when Consumers are Heterogeneously Overconfident: Producer Liability vs. Minimum Quality Standard Regulation," CESifo Working Paper Series 5003, CESifo Group Munich.


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