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The Impact of Liability on the Physician Labor Market


  • Eric Helland
  • Mark H. Showalter


This study examines the impact of malpractice reforms on physician behavior using a new measure of liability risk and a nationally representative, individual-level data set on physician behavior. We match our liability measure to data on physician behavior from the Physician Practice Costs and Income Survey (PPCIS). Data from the PPCIS bracket a period of substantial state-level legal reform between 1983 and 1988, which provides identifying variation in our liability measure. We estimate the impact of liability reform on hours worked. We find an estimated elasticity of hours worked to liability exposure of - .285 for the full sample of physicians. The effect for physicians ages 55 or older is much larger: we find an elasticity of - 1.224 for this category. We find that an increase in $1 of expected liability is associated with a $.70-$1.05 increase in malpractice premiums. (c) 2009 by The University of Chicago. All rights reserved.

Suggested Citation

  • Eric Helland & Mark H. Showalter, 2009. "The Impact of Liability on the Physician Labor Market," Journal of Law and Economics, University of Chicago Press, vol. 52(4), pages 635-663, November.
  • Handle: RePEc:ucp:jlawec:v:52:y:2009:i:4:p:635-663

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    References listed on IDEAS

    1. Thornton, James, 1997. "Are malpractice insurance premiums a tort signal that influence physician hours worked?," Economics Letters, Elsevier, vol. 55(3), pages 403-407, September.
    2. Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc.
    3. Jayanta Bhattacharya, 2005. "Specialty Selection and Lifetime Returns to Specialization Within Medicine," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
    4. Hughes, James W & Snyder, Edward A, 1995. "Litigation and Settlement under the English and American Rules: Theory and Evidence," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 225-250, April.
    5. Daniel Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 353-390.
    6. George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
    7. Jonathan Klick & Thomas Stratmann, 2007. "Medical Malpractice Reform and Physicians in High-Risk Specialties," The Journal of Legal Studies, University of Chicago Press, vol. 36(S2), pages 121-142, June.
    8. Eric Helland, 2003. "Contingency Fees, Settlement Delay, and Low-Quality Litigation: Empirical Evidence from Two Datasets," Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(2), pages 517-542, October.
    9. Eric Helland & Jonathan Klick & Alexander Tabarrok, 2005. "Data Watch: Tort-uring the Data," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 207-220, Spring.
    10. Showalter, Mark H. & Thurston, Norman K., 1997. "Taxes and labor supply of high-income physicians," Journal of Public Economics, Elsevier, vol. 66(1), pages 73-97, October.
    11. David A. Matsa, 2007. "Does Malpractice Liability Keep the Doctor Away? Evidence from Tort Reform Damage Caps," The Journal of Legal Studies, University of Chicago Press, vol. 36(S2), pages 143-182, June.
    12. Dubay, Lisa & Kaestner, Robert & Waidmann, Timothy, 1999. "The impact of malpractice fears on cesarean section rates," Journal of Health Economics, Elsevier, vol. 18(4), pages 491-522, August.
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    Cited by:

    1. Lakdawalla, Darius N. & Seabury, Seth A., 2012. "The welfare effects of medical malpractice liability," International Review of Law and Economics, Elsevier, vol. 32(4), pages 356-369.
    2. Ulrich Matter & Alois Stutzer, 2015. "Politico-Economic Determinants of Tort Reforms in Medical Malpractice," Working papers 2015/02, Faculty of Business and Economics - University of Basel.
    3. Anca Cotet, 2009. "Tort Reform and the Demand for Medical Care: Evidence from State-by-State Variation in Non-Economic Damages Caps," Working Papers 200901, Ball State University, Department of Economics, revised Mar 2010.
    4. Hyman, David A. & Silver, Charles & Black, Bernard & Paik, Myungho, 2015. "Does tort reform affect physician supply? Evidence from Texas," International Review of Law and Economics, Elsevier, vol. 42(C), pages 203-218.
    5. Eric Helland & Darius N. Lakdawalla & Anup Malani & Seth A. Seabury, 2014. "Unintended Consequences of Products Liability: Evidence from the Pharmaceutical Market," NBER Working Papers 20005, National Bureau of Economic Research, Inc.
    6. Peter Chinloy & Daniel Winkler, 2011. "Contracts, Labor Supply and Income Targeting," Journal of Labor Research, Springer, vol. 32(2), pages 113-135, June.
    7. Helland, Eric & Seabury, Seth A., 2015. "Tort reform and physician labor supply: A review of the evidence," International Review of Law and Economics, Elsevier, vol. 42(C), pages 192-202.
    8. repec:bla:jrinsu:v:84:y:2017:i:2:p:691-715 is not listed on IDEAS
    9. 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.

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