American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants
American Economic Journal: Economic Policy
vol. 14,
no. 2, May 2022
(pp. 366–401)
Abstract
Liability laws designed to compensate for harms caused by defective products may also affect innovation. We examine this issue by exploiting a major quasi-exogenous increase in liability risk faced by US suppliers of polymers used to manufacture medical implants. Difference-in-difference analyses show that this surge in suppliers' liability risk had a large and negative impact on downstream innovation in medical implants, but it had no significant effect on upstream polymer patenting. Our findings suggest that liability risk can percolate throughout a vertical chain and may have a significant chilling effect on downstream innovation.Citation
Galasso, Alberto, and Hong Luo. 2022. "When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants." American Economic Journal: Economic Policy, 14 (2): 366–401. DOI: 10.1257/pol.20190757Additional Materials
JEL Classification
- K13 Tort Law and Product Liability; Forensic Economics
- L64 Other Machinery; Business Equipment; Armaments
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
- O31 Innovation and Invention: Processes and Incentives
- O34 Intellectual Property and Intellectual Capital
There are no comments for this article.
Login to Comment