Does Tort Reform Matter in Environmental Outcomes? An Empirical Investigation

Since the early 1980s, states have enacted various tort reforms aimed at curtailing runaway litigation. In particular, states restricted caps on various damages awarded through the tort system and limited applicability of joint and several liability. Legal scholars have suggested that reigning in the tort system may increase harm by decreasing the consequences of wrongdoing by potential tortfeasors. A countervailing effect would arise, however, if eliminating joint and several liability encourages wealthy defendants to lower their payable damages by naming judgment-proof parties as co-defendants. To determine which effect prevails, I exploit state and year variation in tort liability rules to see if tort reform lowers the level of hazardous chemical emissions released by firms. Reform of joint and several liability is found to significantly reduce emissions, while punitive damage caps are found to increase emissions.