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The Impact of Damage Caps on Malpractice Claims: Randomization Inference with Difference‐in‐Differences

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  • John J. Donohue
  • Daniel E. Ho

Abstract

We use differences‐in‐differences (DID) to assess the impact of damage caps on medical malpractice claims for states adopting caps between 1991–2004. We find that conventional DID estimators exhibit acute model sensitivity. As a solution, we offer (nonparametric) covariance‐adjusted randomization inference, which incorporates information about cap adoption more directly and reduces model sensitivity. We find no evidence that caps affect the number of malpractice claims against physicians.

Suggested Citation

  • John J. Donohue & Daniel E. Ho, 2007. "The Impact of Damage Caps on Malpractice Claims: Randomization Inference with Difference‐in‐Differences," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 4(1), pages 69-102, March.
    • Handle: RePEc:wly:empleg:v:4:y:2007:i:1:p:69-102
    DOI: 10.1111/j.1740-1461.2007.00082.x
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    Cited by:

    1. Eric Cardella & Carl Kitchens, 2017. "The impact of award uncertainty on settlement negotiations," Experimental Economics, Springer;Economic Science Association, vol. 20(2), pages 333-367, June.
    2. Matter, Ulrich & Stutzer, Alois, 2015. "Politico-economic determinants of tort reforms in medical malpractice," Working papers 2015/02, Faculty of Business and Economics - University of Basel.
    3. Michael D. Frakes & Matthew B. Frank & Seth A. Seabury, 2017. "The Effect of Malpractice Law on Physician Supply: Evidence from Negligence-Standard Reforms," NBER Working Papers 23446, National Bureau of Economic Research, Inc.
    4. Kyle Carlson, 2018. "Red Alert: Prenatal Stress and Plans to Close Military Bases," American Journal of Health Economics, MIT Press, vol. 4(3), pages 287-320, Summer.
    5. Myungho Paik & Bernard Black & David Hyman, 2013. "The Receding Tide of Medical Malpractice Litigation: Part 2—Effect of Damage Caps," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 10(4), pages 639-669, December.
    6. Zabinski, Zenon & Black, Bernard S., 2022. "The deterrent effect of tort law: Evidence from medical malpractice reform," Journal of Health Economics, Elsevier, vol. 84(C).
    7. McMichael, Benjamin, 2017. "Beyond Physicians: The Effect of Licensing and Liability Laws on the Supply of Nurse Practitioners and Physician Assistants," Working Papers 07538, George Mason University, Mercatus Center.
    8. Michael D. Frakes & Jonathan Gruber, 2018. "Defensive Medicine: Evidence from Military Immunity," NBER Working Papers 24846, National Bureau of Economic Research, Inc.
    9. Frakes, Michael D. & Frank, Matthew B. & Seabury, Seth A., 2020. "The effect of malpractice law on physician supply: Evidence from negligence-standard reforms," Journal of Health Economics, Elsevier, vol. 70(C).
    10. Ali Moghtaderi & Steven Farmer & Bernard Black, 2019. "Damage Caps and Defensive Medicine: Reexamination with Patient‐Level Data," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 16(1), pages 26-68, March.
    11. Matter, Ulrich & Stutzer, Alois, 2016. "The role of party politics in medical malpractice tort reforms," European Journal of Political Economy, Elsevier, vol. 42(C), pages 17-35.

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