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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Eric Helland

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Working Papers

March 2014Unintended Consequences of Products Liability: Evidence from the Pharmaceutical Market
with Darius N. Lakdawalla, Anup Malani, Seth A. Seabury: w20005
In a complex economy, production is vertical and crosses jurisdictional lines. Goods are often produced by an upstream national or global firm and improved or distributed by local firms downstream. In this context, heightened products liability may have unintended consequences on product sales and consumer safety. Conventional wisdom holds that an increase in tort liability on the upstream firm will cause that firm to (weakly) increase investment in safety or disclosure. However, this may fail in the real-world, where upstream firms operate in many jurisdictions, so that the actions of a single jurisdiction may not be significant enough to influence upstream firm behavior. Even worse, if liability is shared between upstream and downstream firms, higher upstream liability may mechanica...

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