Does Litigation = Regulation?
A very intriguing analysis just posted on bepress calls into question whether litigation is a substitute for regulation. See Eric Helland and Jonathan Klick, The Relation Between Regulation and Class Actions: Evidence from the Insurance Industry, available here.
Here is the abstract:
Standardlaw and economics models imply that regulation and litigation serve assubstitutes. We test this by looking at the incidence of insuranceclass actions as a function of measures of regulatory enforcement. Wealso look specifically at whether states with clear regulatorystandards regarding the use of OEM parts experience less litigationover this issue. We find no evidence of substitution between regulationand litigation. We also examine the possibility that litigation is morefrequent in states where regulators are more likely to be captured byindustry interests, finding no support for this hypothesis either.Instead, litigation is more likely in states where similar litigationhas been successful in the past, calling into question standard law andeconomics models in this area.
ADL
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