Minimum Asset Requirements and Compulsory Liability Insurance As Solutions to the Judgment-Proof Problem
Minimum asset and liability insurance requirements must often be met in order for parties to participate in potentially harmful activities. Such financial responsibility requirements may improve parties' decisions whether to engage in harmful activities and, if so, their efforts to reduce risk. However, the requirements may undesirably prevent some parties with low assets from engaging in activities. Liability insurance requirements tend to improve parties' incentives to reduce risk when insurers can observe levels of care, but dilute incentives to reduce risk when insurers cannot observe levels of care. In the latter case, compulsory liability insurance may be inferior to minimum asset requirements.
|Date of creation:||Mar 2004|
|Publication status:||published as Shavell, Steven. "Minimum Asset Requirements And Compulsory Liability Insurances As Solutions To The Judgment-Proof Problem," Rand Journal of Economics, 2005, v36(1,Spring), 63-77.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Boyd, James & Ingberman, Daniel E, 1997. "The Search for Deep Pockets: Is "Extended Liability" Expensive Liability?," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(1), pages 232-58, April.
- T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
- Boyer, M. & Laffont, J.J., 1995.
"Environmental Risks and Bank Liability,"
Cahiers de recherche
9501, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Marcel Boyer & Jean-Jacques Laffont, 1994. "Environmental Risks and Bank Liability," CIRANO Working Papers 94s-22, CIRANO.
- Boyer, M. & Laffont, J.J., 1995. "Environmental Risks and Bank Liability," Cahiers de recherche 9501, Universite de Montreal, Departement de sciences economiques.
- Boyer, Marcel & Laffont, Jean-Jacques, 1994. "Environmental Risks and Bank Liability," IDEI Working Papers 45, Institut d'Économie Industrielle (IDEI), Toulouse.
- Hiriart, Yolande & Martimort, David, 2004.
"The Benefits of Extended Liability,"
IDEI Working Papers
334, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jun 2005.
- Rochet, Jean-Charles, 1992. "Capital requirements and the behaviour of commercial banks," European Economic Review, Elsevier, vol. 36(5), pages 1137-1170, June.
- Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
- Kim, Daesik & Santomero, Anthony M, 1988. " Risk in Banking and Capital Regulation," Journal of Finance, American Finance Association, vol. 43(5), pages 1219-1233, December.
- Kahane, Yehuda, 1977. "Capital adequacy and the regulation of financial intermediaries," Journal of Banking & Finance, Elsevier, vol. 1(2), pages 207-218, October.
- Polborn, Mattias K., 1998. "Mandatory insurance and the judgment-proof problem," International Review of Law and Economics, Elsevier, vol. 18(2), pages 141-146, June.
- Steven Shavell, 2002. "Minimum Asset Requirements," NBER Working Papers 9335, National Bureau of Economic Research, Inc.
- Jost, Peter-J., 1996. "Limited liability and the requirement to purchase insurance," International Review of Law and Economics, Elsevier, vol. 16(2), pages 259-276, June.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:10341. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.