Abstract

http://ssrn.com/abstract=580721
 
 

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Minimum Asset Requirements and Compulsory Liability Insurance as Solutions to the Judgment-Proof Problem


Steven Shavell


Harvard Law School; National Bureau of Economic Research (NBER)

February 2004

Harvard Law and Economics Discussion Paper No. 456

Abstract:     
Minimum asset and liability insurance requirements must often be met in order for parties to participate in potentially harmful activities. Such financial responsibility requirements may improve parties' decisions whether to engage in harmful activities and, if so, their efforts to reduce risk. However, the requirements may undesirably prevent some parties with low assets from engaging in activities. Liability insurance requirements tend to improve parties' incentives to reduce risk when insurers can observe levels of care, but dilute incentives to reduce risk when insurers cannot observe levels of care. In the latter case, compulsory liability insurance may be inferior to minimum asset requirements.

Number of Pages in PDF File: 43

JEL Classification: D00, K13, K20, L5

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Date posted: August 23, 2004  

Suggested Citation

Shavell, Steven, Minimum Asset Requirements and Compulsory Liability Insurance as Solutions to the Judgment-Proof Problem (February 2004). Harvard Law and Economics Discussion Paper No. 456. Available at SSRN: http://ssrn.com/abstract=580721 or http://dx.doi.org/10.2139/ssrn.580721

Contact Information

Steven Shavell (Contact Author)
Harvard Law School ( email )
1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-495-3668 (Phone)
617-496-2256 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  19
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