Who Really Benefits from Liability Litigation?

Abstract:     
Various studies have estimated the annual cost of product liability litigation alone (not to mention other kinds of liability litigation) in the United States to be between $80 and $117 billion. That's more than the combined gross national products of Bolivia, Chile, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay, Peru and Uruguay or about equal to the annual profits of the top 200 corporations in America. But that's only the direct cost. When you add the indirect costs that are incurred in order to avoid liability -- needless testing, excessive liability insurance costs, etc. -- the total could reach as much as $300 billion a year -- the combined gross national products of Austria, Luxembourg, the Philippines, Portugal and Switzerland. This article discusses the liability litigation situation in the United States.

JEL Classifications: K13

Working Paper Series