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The Causes and Effects of Liability Reform: Some Empirical Evidence

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  • Thomas J. Campbell
  • Daniel P. Kessler
  • George B. Shepherd

Abstract

We provide empirical evidence both on the causes and the effects of liability reforms. Using a newly collected data set of state tort laws and a panel data set containing industry-level data by state for the years 1969-1990, we (1) identify the characteristics of states that are associated with liability reforms and (2) examine whether liability reforms influence productivity and employment. We present two central findings. First, reductions in liability levels are associated with increases in measured productivity and employment in most industries that we studied. Second, liability reforms that reduce legal liability are generally positively correlated with measures of political conservatism.

Suggested Citation

  • Thomas J. Campbell & Daniel P. Kessler & George B. Shepherd, 1995. "The Causes and Effects of Liability Reform: Some Empirical Evidence," NBER Working Papers 4989, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4989
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    1. repec:hoo:wpaper:e-93-6 is not listed on IDEAS
    2. Carlino, Gerald A. & Voith, Richard, 1992. "Accounting for differences in aggregate state productivity," Regional Science and Urban Economics, Elsevier, vol. 22(4), pages 597-617, November.
    3. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
    4. Patricia E. Beeson & Steven Husted, 1986. "Patterns and determinants of inefficiency in state manufacturing," Working Paper 8603, Federal Reserve Bank of Cleveland.
    5. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May.
    6. Danzon, Patricia, 1984. "The Frequency and Severity of Medical Malpractice Claims," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 115-148, April.
    7. Epstein, Richard A, 1988. "The Political Economy of Product Liability Reform," American Economic Review, American Economic Association, vol. 78(2), pages 311-315, May.
    8. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
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    Cited by:

    1. Li, Kui-Wai & Kwok, Ming-Lok, 2009. "Output volatility of five crisis-affected East Asia economies," Japan and the World Economy, Elsevier, vol. 21(2), pages 172-182, March.
    2. 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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