The impact of non-economic damages caps on obstetrics: Incentives versus practice style

- I examine the effect of non-economic damages caps on the field of obstetrics.
- The effect of damages caps on ob-gyns and C-sections is not robust over time.
- Ob-gyn entrants in states with caps are a selected sample.
- The effect of damages caps on C-sections is concentrated in areas with more entry.
- The effect on C-sections is mostly driven by selection among ob-gyns.

This paper uses 1989-2010 county-level data to reexamine the effect of non-economic damages caps on the field of obstetrics. Previous literature found that caps on damages lead to both changes in the number of physicians and changes in treatment patterns. This paper investigates whether the changes in procedures are attributable to changes in incentives or to selection when new entrants could have a different practice style than incumbents. First, I find that the relationship between non-economic damages caps and the number of physicians and procedures identified in previous literature is not robust to the inclusion of the newer policy changes. Second, over the period when such changes were observed, the impact on procedures is concentrated in areas with the greatest changes in the number of obstetricians/gynecologists per capita, suggesting that most of the effect on procedures is driven by differences in practice style between entrants and incumbents.