Working Paper: NBER ID: w4989
Authors: Thomas J. Campbell; Daniel P. Kessler; George B. Shepherd
Abstract: We provide empirical evidence both on the causes and the effects of liability reforms. Using a newly collected data set of state tort laws and a panel data set containing industry-level data by state for the years 1969-1990, we (1) identify the characteristics of states that are associated with liability reforms and (2) examine whether liability reforms influence productivity and employment. We present two central findings. First, reductions in liability levels are associated with increases in measured productivity and employment in most industries that we studied. Second, liability reforms that reduce legal liability are generally positively correlated with measures of political conservatism.
Keywords: liability reform; productivity; employment; political conservatism
JEL Codes: K13; K31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reductions in liability levels (K13) | increases in productivity (O49) |
| reductions in liability levels (K13) | increases in employment (J23) |
| political conservatism (P16) | adoption of liability reforms (K13) |
| number of lawyers (K29) | resistance to liability reforms (K13) |
| number of doctors (I11) | support for liability reforms (K13) |