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  • August 2017
  • Article
  • Journal of Law & Economics

Tort Reform and Innovation

By: Alberto Galasso and Hong Luo
  • Format:Print
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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 develop a theoretical model that predicts that the impact of reducing liability risks for physicians on innovation may be positive or negative, depending on the characteristics of the technology. Empirically, 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 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.

Keywords

Governing Rules, Regulations, and Reforms; Health Care and Treatment; Technological Innovation; Legal Liability; Medical Devices and Supplies Industry

Citation

Galasso, Alberto, and Hong Luo. "Tort Reform and Innovation." Journal of Law & Economics 60, no. 3 (August 2017): 385–412.
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About The Author

Hong Luo

Strategy
→More Publications

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More from the Authors
  • Laboratory Safety and Research Productivity By: Alberto Galasso, Hong Luo and Brooklynn Zhu
  • When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants By: Alberto Galasso and Hong Luo
  • Spotify's Audio-First Strategy: Leading the Podcasting Market By: Hong Luo and Carol Lin
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