The Regulation-Litigation Interaction

This paper provides a preview of a new Joint Center book on the relationship between regulation and litigation.

The Blockbuster Punitive Damages Awards

This paper provides an analysis of 64 punitive damages awards of at least $100 million. Based on an inventory of these cases, there is evidence that these blockbuster awards are highly concentrated geographically, as two states account for 27 of the 64 awards.The awards also have been rising substantially over time, with the majority of these blockbuster awards taking place since 1999.An assessment of the current status of the blockbuster punitive damages awards indicates that most of these awards have been appealed, but the reversal of these punitive damages awards is the exception rather than the rule.Many large punitive damages awards are settled without any appeal. The ratio limits outlined in State Farm v. Campbell will affect over 90% of the blockbuster awards and over 90% of the damages associated with these awards if a ratio of 1.0 becomes the upper limit on punitive damages.

Specific Information, General Information, and Employment Matches Under Uncertainty

Employment matches under uncertainty are typically accompanied by opportunities for information acquisition. Workers can acquire specific information about productivity lotteries at the firm or general information affecting their probabilistic beliefs about work elsewhere. Enterprises can acquire specific information concerning the productivity of a particular worker or general information about different groups of workers in a production process. In all cases, the market equilibrium with flexible wages is efficient. Moreover, there is no opportunity for strategic behavior that would alter this result. Both forms of information are associated with rising earnings profiles over time, hut the steepness is greater in the general case. The negative turnover-wage relation is attributable in part to the lower match termination rate of workers with productive lob histories, who earn higher wages than their less productive counterparts. General information is associated with more termination of employment matches by employers and employees than is specific information. The implications of specific/general information for matching processes in many respects aralle1 the role of that distinction in human capital theory, strengthening the link between matching theories and earlier human capital analyses.

Monetizing the Benefits of Risk and Environmental Regulation

This article provides a response to the opponents of monetization of risk and environmental benefits, such as the authors of Priceless: On Knowing the Price of Everything and the Value of Nothing . Putting benefit values in dollar terms ensures that there will be full recognition of these benefits in the policy evaluation process, and also places them on terms comparable to program costs. Much of the article is devoted to advocating the use of the value of statistical life to value health risk reductions from government regulations. The article explores sensitive issues such as the heterogeneity of the value of statistical life with respect to income and age. While the use of a "senior discount" was controversial and involved too great of a discount, there is substantial evidence that there are age variations in the value of statistical life. The article also advocates the continued use of stated preference approaches to valuing environmental benefits, which is in contrast to the critiques of stated preference analyses by those who consider environmental resources to be priceless and by those who believe that all non-use values of environmental benefits are zero.

Sorting Models of Labor Mobility, Turnover, and Unemployment

Utilizing a model in which individuals search among lotteries on likely success at different jobs, this paper analyzes both the search decision when unemployed and the implications of the sorting process. The model correctly predicts both the direction and convexity of the age-unemployment relationship and the impact of experience on turnover and wages. Actions taken when unemployed have an important impact on equilibrium turnover rates, unemployment rates, and the work history of the pool of unemployed. The sorting model is used to analyze racial differences in youth unemployment and major empirical features of low income labor markets.

The Blockbuster Punitive Damages Awards

This paper provides an analysis of 64 punitive damages awards of at least $100 million. Based on an inventory of these cases, there is evidence that these blockbuster awards are highly concentrated geographically, as two states account for 27 of the 64 awards. The awards also have been rising substantially over time, with the majority of these blockbuster awards taking place since 1999. An assessment of the current status of the blockbuster punitive damages awards indicates that most of these awards have been appealed, but the reversal of these punitive damages awards is the exception rather than the rule. Many large punitive damages awards are settled without any appeal. The ratio limits outlined in State Farm v. Campbell will affect over 90% of the blockbuster awards and over 90% of the damages associated with these awards if a ratio of 1.0 becomes the upper limit on punitive damages

The Performance of Liability Insurance in States with Different Products-Liability Statutes

The liability crisis of the mid-1980s has led to an extensive reexamination of the liability system. A number of explanations have been offered for the substantial increase in insurance premiums and, in some cases, a decline in the availability of insurance. These include stimulation of the underwriting cycle by a decline in interest rates, collusion among insurance firms, rising tort costs, and uncertainty with respect to the liability burden.\u27 Most observers, however, also point to changes in tort law itself. For example, plaintiffs may now have a more favorable environment for obtaining an award and, if they are successful, they may receive a larger award than in earlier eras. In addition, changes in the legal environment may have fostered considerable uncertainty that itself increases the costs insurance companies face. The liability crisis has led to reassessments of the state of tort law and explorations of ways in which it can be improved. A variety of legal reform groups, a Department of Justice task force, and a recent spate of conferences have all addressed aspects of the liability crisis and ways in which the law can be restructured. A wide variety of states have also begun legislative initiatives to limit tort recoveries. Among the more popular measures are caps and restrictions on punitive damages, caps on pain and suffering damages, modifications in comparative negligence standards, limits on the application of joint and several liability, changes in collateral source rules, and limits on government liability. Most of these changes came in the late 1980s, and it is too early to assess their implications. It is, however, possible to explore the role that earlier statutory reforms have had. Not all states have products-liability statutes, and those statutes that have been enacted differ considerably. This article focuses on how the performance of products-liability insurance varies with the statutory regime by using the complete insurance files for the products-liability-bodily injury lines of the Insurance Services Office (ISO). Section II provides an overview of how the exposure of insurance companies varies under different statutory regimes. A law that increases the availability of insurance should lead to more insurance being written and, hence, to greater levels of exposure. After this overview, the article examines specific products-liability statutes, including products-liability definitions in Section III, state-of-the-art defenses in Section IV, statutes of limitation in Section V, and collateral source rules and damages rules in Section VI. Section VII contains a multivariate regression analysis of premium levels, providing a third set of tests for the effect of statutory provisions. I conclude that differences in the character of state liability statutes are associated with dramatic differences in the performance of insurance across states-differences that persist over time. The failure of the insurance market to adjust completely for differences in statutory regimes illustrates its distinct character