Publications
Publications
- May 2022
- American Economic Journal: Economic Policy
When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants
By: Alberto Galasso and Hong Luo
Abstract
Liability laws designed to compensate for harms caused by defective products may also affect innovation. We examine this issue by exploiting a major quasi-exogenous increase in liability risk faced by U.S. suppliers of polymers used to manufacture medical implants. Difference-in-differences analyses show that this surge in suppliers' liability risk had a large and negative impact on downstream innovation in medical implants, but it had no significant effect on upstream polymer patenting. Our findings suggest that liability risk can percolate throughout a vertical chain and may have a significant chilling effect on downstream innovation.
Keywords
Product Liability; Innovation; Tort; Medical Devices; Vertical Foreclosure; Product; Innovation and Invention; Legal Liability; Laws and Statutes; Medical Devices and Supplies Industry
Citation
Galasso, Alberto, and Hong Luo. "When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants." American Economic Journal: Economic Policy 14, no. 2 (May 2022): 366–401.