Summary of the Papers – Microeconomics 1998

Peter C. Reiss

PCR

Peter C. Reiss

THIS ISSUE CONTAINS papers presented at the twelfth meeting of the
Brookings Microeconomics Panel held at the Brookings Institution in
Washington, D.C., June 19 and 20, 1998. Three of the papers study
the economic and legal impacts of liability laws. The other four papers
consider a broad range of economic and policy issues. Turning first to
the liability papers, Steve Garber and John Adams examine the impact
of product liability laws on automobile manufacturers’ profitability by
measuring stock market and customer reaction to verdicts in automotive
personal injury cases. They find small and sometimes anomalous effects
of verdicts on car sales and firms’ stock prices. Patricia Born and Kip
Viscusi consider the effect of liability reforms on medical malpractice
and general liability insurance. They find that damage caps and several
other types of state liability reforms decreased insurance premiums and
yet improved the profitability of insurance companies. Thomas Campbell,
Daniel Kessler, and George Shepherd provide empirical evidence
on the impact of changes in liability laws on state-level productivity
from 1970 to 1990. They find that states that reduced liability experienced
greater increases in productivity. There also is some evidence to
suggest the converse, that states that strengthened their liability laws
tended to have less of an increase in productivity.