DP11358 | Tort Reform and Innovation

Publication Date

06/27/2016

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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. Tort reforms 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 propensity to develop technologies of the highest and lowest quality. Our results underscore the importance of considering dynamic effects in the economic analysis of tort laws.