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Product Liability, Research and Development, and Innovation

  • Viscusi, W Kip
  • Moore, Michael J

Product liability ideally should promote efficient levels of product safety but misdirected liability efforts may depre ss beneficial innovations. This paper examines these competing effects of liability costs on product R&D intensity and new product introductio ns by manufacturing firms. At low to moderate levels of expected liabil ity costs, there is a positive effect of liability costs on product innovation. At very high levels of liability costs, the effect is negative. At the sample mean, liability costs increase R&D intensity by 15 percent. The greater linkage of these effects to product R&D i s consistent with the increased prominence of the design defect doctrine. Copyright 1993 by University of Chicago Press.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 101 (1993)
Issue (Month): 1 (February)
Pages: 161-84

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Handle: RePEc:ucp:jpolec:v:101:y:1993:i:1:p:161-84
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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