Does Liability Affect Small Business?

73 Pages Posted: 29 Jun 2008

See all articles by John Romley

John Romley

Price School of Public Policy, University of Southern California; University of Southern California - Schaeffer Center for Health Policy and Economics

Bogdan Savych

Workers Compensation Research Institute

Date Written: June 27, 2008

Abstract

Small-business owners and advocates have expressed concern that liability jeopardizes the economic viability of small businesses. Yet empirical evidence concerning this issue is limited. This study assesses the impact of liability on the number of firms in a wide variety of industries dominated by small businesses. The authors use caps on non-economic damages as a measure of liability pressure and compare the number of small businesses before and after supreme courts in Illinois, Ohio, and Oregon struck caps down. This analysis indicates that caps are associated with more firms in some industries but fewer in others. The hypothesis that the average impact is negligible cannot be rejected.

Keywords: liability, small business

JEL Classification: K29

Suggested Citation

Romley, John and Savych, Bogdan, Does Liability Affect Small Business? (June 27, 2008). RAND Working Paper Series WR-541-EMKF. Available at SSRN: https://ssrn.com/abstract=1152449 or http://dx.doi.org/10.2139/ssrn.1152449

John Romley (Contact Author)

Price School of Public Policy, University of Southern California ( email )

USC Schaeffer Center, Verna & Peter Dauterive Hall
635 Downey Way
Los Angeles, CA CA 90089-3333
United States

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

Bogdan Savych

Workers Compensation Research Institute ( email )

955 Massachusetts Avenue
Cambridge, MA 02139
United States

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