A Cross-National Study of Government Social Insurance as an Alternative to Tort Liability Compensation

Litigation rates in the United States have long been considered out of proportion with the remainder of the world, leading to a good deal of economic research trying to understand the causes. Much of that literature has focused on lawyer compensation rules and availability of general damage awards. Another possible reason for differences in national litigation rates is the relative generosity of government social programs. Using a sample of 24 countries over a 12-year period, we test the relationship between the size of government social program payments and liability costs as measured by liability insurance premiums, and find a strong negative relationship, controlling for income, accident rates, and a variety of other factors.