NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Dan P. Ly

Harvard University
180 Longwood Avenue
Boston MA 02115

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Institutional Affiliation: Harvard University

NBER Working Papers and Publications

February 2016Self-insuring against Liability Risk: Evidence from Physician Home Values in States with Unlimited Homestead Exemptions
with Eric Helland, Anupam B. Jena, Seth A. Seabury: w22031
When faced with financial uncertainty, rational agents have incentives to take steps ex ante to reduce the probability (self-protection) or size (self-insurance) of a loss. However, in the case of liability risk, especially physician responses to malpractice risk, most empirical analyses have focused exclusively on measuring self-protection. This paper studies whether physicians invest in self-insurance by exploring how they respond to policies that allow them to lower the financial cost of malpractice liability. Specifically, we test whether physicians exploit provisions of bankruptcy laws and adjust the value of their home purchases to protect assets from liability claims exceeding their malpractice policy limits. We find that in states with unlimited “homestead” exceptions—provisions ...
 
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