The Determinants of State‐Level Caps on Punitive Damages: Theory and Evidence

16 Pages Posted: 19 Jan 2013

See all articles by Thomas J. Miceli

Thomas J. Miceli

University of Connecticut - Department of Economics

Michael P. Stone

Quinnipiac University - Department of Economics

Date Written: January 2013

Abstract

Under the standard economic model of torts, punitive damages correct for imperfect detection. Incorporating litigation costs into the model provides a justification for punitive damage caps. At the optimum, caps balance deterrence against the cost of litigation. Empirical testing of the model is performed via Cox proportional and parametric hazard analyses, using a panel dataset from 1981 to 2007. The results reveal a positive relationship between legal services employment (a proxy for legal costs) and cap enactment, and a negative relationship between state gross state product (a proxy for damages) and cap enactment. Cap enactment is also influenced by political ideology.

JEL Classification: K13, K41, L51

Suggested Citation

Miceli, Thomas J. and Stone, Michael P., The Determinants of State‐Level Caps on Punitive Damages: Theory and Evidence (January 2013). Contemporary Economic Policy, Vol. 31, Issue 1, pp. 110-125, 2013. Available at SSRN: https://ssrn.com/abstract=2203292 or http://dx.doi.org/10.1111/j.1465-7287.2011.00297.x

Thomas J. Miceli (Contact Author)

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States
860-486-5810 (Phone)
860-486-4463 (Fax)

Michael P. Stone

Quinnipiac University - Department of Economics ( email )

275 Mount Carmel Avenue
Hamden, CT 06518
United States

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