Tort Reform and Innovation

46 Pages Posted: 10 Oct 2016 Last revised: 22 Jan 2023

See all articles by Alberto Galasso

Alberto Galasso

University of Toronto - Strategic Management

Hong Luo

Harvard Business School - Strategy Unit

Multiple version iconThere are 2 versions of this paper

Date Written: October 2016

Abstract

Current academic and policy debates focus on the impact of tort reforms on physicians' behavior and medical costs. This paper examines whether these reforms also affect incentives to develop new technologies. We find that, on average, laws that limit the liability exposure of healthcare providers are associated with a significant reduction in medical device patenting and that the effect is predominantly driven by innovators located in the states passing the reforms. Tort laws have the strongest impact in medical fields in which the probability of facing a malpractice claim is the largest, and they do not seem to affect the amount of new technologies of the highest and lowest quality. Our results underscore the importance of considering dynamic effects in the economic analysis of tort laws.

Suggested Citation

Galasso, Alberto and Luo, Hong, Tort Reform and Innovation (October 2016). NBER Working Paper No. w22712, Available at SSRN: https://ssrn.com/abstract=2850227

Alberto Galasso (Contact Author)

University of Toronto - Strategic Management ( email )

Canada

Hong Luo

Harvard Business School - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States

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