Working Paper: NBER ID: w22712
Authors: Alberto Galasso; Hong Luo
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.
Keywords: Tort Reform; Innovation; Medical Devices; Patent Data
JEL Codes: I1; K4; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tort reforms (K13) | medical device patenting (O34) |
| caps on noneconomic damages (K13) | medical device patenting (O34) |
| tort reforms (K13) | innovation incentives (O31) |
| tort reforms (K13) | chilling effect on innovation (O36) |
| high liability risks (K13) | demand for new technologies (O33) |
| chilling effect on innovation (O36) | patenting activity (O34) |
| tort reforms (K13) | heterogeneous effects in medical fields (C21) |