Does Liability Affect Small Business?

Small-business owners and advocates have voiced concern that legal liability jeopardizes the economic viability of small businesses. At the same time, tort reformers have supported restrictions on legal damages for "Pain and suffering" and other non-economic harms. This paper investigates the relationship between state-level caps on non-economic damages and the number of firms in industries dominated by small businesses. This paper should be of interest to policymakers at the federal and state levels, as well as small businesspeople, their employers and customers, and others interested in small business and liability law.