Is the Insurance Aspect of Producer Liability Valued by Consumers? Liability Changes and Childhood Vaccine Consumption.

Standard economic theory predicts that the forced of an insurance policy to the purchase of a risky product cannot be welfare enhancing. At best, such insurance is redundant due to cheaper methods of insuring against loss, and, at worst, such coverage is not demanded at all. Exploiting the change in the liability environment which occurred in the vaccine market in the early 1980s, this article seeks to identify the value that consumers place on the insurance component of producer liability. The principal finding is that the demand for immunization is not increased and may have been reduced, by liability This implies that consumers place no value on the insurance which they are forced to buy under this regime, leaving them worse off than they would have been without producer liability for vaccine injuries. The best estimate is that by 1985, the change in liability environment had reduced the number of children properly immunized with the DPT and polio vaccines by approximately 1 million. Copyright 1996 by Kluwer Academic Publishers