Tort Reform and Innovation

Alberto Galasso and Hong Luo

No 11358, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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. Tort reforms 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 propensity to develop technologies of the highest and lowest quality. Our results underscore the importance of considering dynamic effects in the economic analysis of tort laws.

Date: 2016-06
New Economics Papers: this item is included in nep-ger, nep-ino and nep-law
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