Tort Reform and Innovation

Alberto Galasso and Hong Luo

No 22712, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: I1 K4 O3 (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-ino and nep-law
Note: LE PR
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Published as Alberto Galasso & Hong Luo, 2017. "Tort Reform and Innovation," The Journal of Law and Economics, vol 60(3), pages 385-412.

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