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Tort Reform and Innovation

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Listed:
  • Alberto Galasso
  • Hong Luo

Abstract

Current academic and policy debates focus on the impact of tort reforms on physicians' behavior and medical costs. This paper examines whether these reforms also affect incentives to develop new technologies. We find that, on average, laws that limit the liability exposure of healthcare providers are associated with a significant reduction in medical device patenting and that the effect is predominantly driven by innovators located in the states passing the reforms. Tort laws have the strongest impact in medical fields in which the probability of facing a malpractice claim is the largest, and they do not seem to affect the amount of new technologies of the highest and lowest quality. Our results underscore the importance of considering dynamic effects in the economic analysis of tort laws.

Suggested Citation

  • Alberto Galasso & Hong Luo, 2016. "Tort Reform and Innovation," NBER Working Papers 22712, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22712
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    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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