NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Causes and Effects of Liability Reform: Some Empirical Evidence

Thomas J. Campbell, Daniel P. Kessler, George B. Shepherd

NBER Working Paper No. 4989
Issued in January 1995
NBER Program(s):   LE

We provide empirical evidence both on the causes and the effects of liability reforms. Using a newly collected data set of state tort laws and a panel data set containing industry-level data by state for the years 1969-1990, we (1) identify the characteristics of states that are associated with liability reforms and (2) examine whether liability reforms influence productivity and employment. We present two central findings. First, reductions in liability levels are associated with increases in measured productivity and employment in most industries that we studied. Second, liability reforms that reduce legal liability are generally positively correlated with measures of political conservatism.

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Published: Review of Economic Studies (2000), forthcoming.

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