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Promoting Safety through Workers' Compensation: The Efficacy and Net Wage Costs of Injury Insurance

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  • Michael J. Moore
  • W. Kip Viscusi

Abstract

This article explores the effects of workers' compensation on fatality rates and wages using the 1982 Panel Study of Income Dynamics and the new occupational fatality data issued by the National Institute for Occupational Safety and Health. The fatality rate depends upon the workers' compensation benefit variables in a manner that suggest that the safety incentive effects of higher insurance premiums offset any moral hazard effect. The estimates imply that in the absence of workers' compensation, fatality rates would increase by over 20%. Premium levels substantially overstate the cost of workers' compensation, due primarily to a direct wage offset from higher benefits. An indirect wage offset resulting from the decrease in risk caused by workers' compensation augments the direct wage effects. The indirect offset is relatively small, equalling about 10% of the total.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 20 (1989)
Issue (Month): 4 (Winter)
Pages: 499-515

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Handle: RePEc:rje:randje:v:20:y:1989:i:winter:p:499-515

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Cited by:
  1. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392 Elsevier.
  2. Kaestner, Robert & Grossman, Michael, 1998. "The effect of drug use on workplace accidents," Labour Economics, Elsevier, vol. 5(3), pages 267-294, September.
  3. W. Kip Viscusi, 1991. "Product and Occupational Liability," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 71-91, Summer.
  4. Askenazy, Philippe, 2004. "Santé et sécurité au travail. Quelques éclairages économiques et internationaux," CEPREMAP Working Papers (Docweb) 0501, CEPREMAP.
  5. G. Dionne & P. Lanoie, 2002. "How to Make a Public Choice about the Value of a Statistical Life : The Case of Road Safety," THEMA Working Papers 2002-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  6. Kelly D. Edmiston, 2006. "Workers' Compensation and State Employment Growth," Journal of Regional Science, Wiley Blackwell, vol. 46(1), pages 121-145.
  7. John Leeth & John Ruser, 2006. "Safety segregation: The importance of gender, race, and ethnicity on workplace risk," Journal of Economic Inequality, Springer, vol. 4(2), pages 123-152, August.

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