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Small-business owners and advocates have expressed concern that liability jeopardizes the economic viability of small businesses. Yet empirical evidence concerning this issue is limited. This study assesses the impact of liability on the number of firms in a wide variety of industries dominated by small businesses. The authors use caps on non-economic damages as a measure of liability pressure and compare the number of small businesses before and after supreme courts in Illinois, Ohio, and Oregon struck caps down. This analysis indicates that caps are associated with more firms in some industries but fewer in others. The hypothesis that the average impact is negligible cannot be rejected.
The research in this report was conducted by the Kauffman-RAND Institute for Entrepreneurship Public Policy.
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