The Effects of Product Liability Litigation on the Value of Firms

We use event study methodology to examine the effects of productliability litigation on firms in the automobile and pharmaceuticalindustries. We find that the filing of a lawsuit, or news storiesthat subsequently lead to the filing of a lawsuit, is associatedwith significant losses in firm value. These losses are approximatelyequal to the upper bound of the direct loss in value of thefirms involved. This means that there may also be some reputationeffect from litigation events. We also find that in the automobileindustry competitors lose when one firm is sued, but in thepharmaceutical industry a lawsuit against one firm leads toan increase in value of other firms.     

Budgeting for Accountability: Municipal Budgeting for the 1990s

The emphasis of a public budget depends on the time and circumstances in which it is developed. During the 1990s, for example, the emphasis has increasingly been on accountability due to widespread public belief in recent years that government is uncontrollable and responds only to special interests. Over the past few years, local budgeters have begun to adapt to this new environment by improving the accountability of the budget to the public. This article summarizes some of the changes taking place and suggests some additional changes that could be adopted to make local budgeting more accountable.     

The Growth of Government: Sources and Limits

Theories of the size of government focus on either the demandfor government or the supply of tax revenues. Demand sidetheories such as those of Peltzman, Meltzer and Richard,Husted and Kenny, and Lott and Kenny are essentially politicaltheories. They emphasize the role of voters or interest groupsin expanding government. Supply side theories such as those ofKau and Rubin, Baumol, West, and Ferris and West emphasize theability of government to collect taxes. In this paper, wecombine both demand and supply side theories. For demand, weuse the Poole-Rosenthal time series data on the ideology ofCongress, on the theory that all political forces mustultimately express themselves in voting which is measured byideology. For supply, we use the Kau-Rubin measures of theability of government to collect taxes as a function of thedeadweight costs of tax collection and ability of individualsto hide revenues. We find that female labor forceparticipation and the associated ability to tax femaleproductivity is the most important factor associated withgovernment, and it alone explains about 60% of the actualgrowth of government. The ideology of the Senate is alsosignificant, but has a small effect. This paper may be thefirst to examine the influence of ideology on the time path ofa policy; other research examining ideology (including ours)has been cross sectional. Further research on the role ofideology in changing policies over time is clearly warranted.