^aDepartment of Economics, Kutztown University, 125 deFrancesco Building, Kutztown, PA 19530-0730, USA. E-mail: esposto@kutztown.edu

Abstract

This study examines the effects of state-level, tort law reforms on the diffusion of medical technology in the United States. The central thesis focuses on the diffusion of medical technology as an indicator of defensive medicine. Specifically, if physicians reduce their level of defensive medicine in the wake of liability reforms, this will show up as a reduction in the demand for and, more importantly, in the quantity supplied of medical technology. I discover after analyzing panel-data reflecting the availability of hospital-based diagnostic technologies by states and for the years 1987, 1990, and 1993 that differences in the availability of the technology are partially the result of state-level liability reforms. Moreover, there are significant differences in the impact of reforms on established (diffused) technologies and newer (diffusing) technologies. The results provide further evidence of the existence of defensive medicine and of the impact of the legal environment on the diffusion of medical technology.