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Revisiting Incentive Effects in Workers' Compensation: Do Higher Benefits Really Induce More Claims?

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  • Erin Todd Bronchetti
  • Melissa McInerney

Abstract

An important question to ask regarding social insurance programs such as workers' compensation (WC) is to what extent do higher benefits lead to more claims? The authors of this study revisit incentive effects of WC, using 25 years of data (1977–2004) from the March Current Population Survey (CPS) to estimate the relationship between WC cash benefit levels and the frequency of WC receipt. Providing new evidence on the subject, they demonstrate that conclusions regarding workers' incentives to claim benefits differ dramatically depending upon how one controls for the confounding influence of an individual's past earnings. The authors' expanded empirical specifications, which include flexible earnings controls, yield benefit-participation elasticities smaller than 0.1. Their findings suggest that WC claims are not particularly responsive to changes in benefit levels and that labor supply disincentives may warrant less concern than economists or policymakers have typically exhibited. The authors also find that WC receipt was less responsive to benefit variation after 1990 than in previous years.

Suggested Citation

  • Erin Todd Bronchetti & Melissa McInerney, 2012. "Revisiting Incentive Effects in Workers' Compensation: Do Higher Benefits Really Induce More Claims?," ILR Review, Cornell University, ILR School, vol. 65(2), pages 286-315, April.
  • Handle: RePEc:sae:ilrrev:v:65:y:2012:i:2:p:286-315
    DOI: 10.1177/001979391206500205
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    References listed on IDEAS

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    Cited by:

    1. Dillender, Marcus, 2015. "The effect of health insurance on workers’ compensation filing: Evidence from the affordable care act's age-based threshold for dependent coverage," Journal of Health Economics, Elsevier, vol. 43(C), pages 204-228.
    2. Bilgrami, Anam & Cutler, Henry & Sinha, Kompal, 2021. "The impact of harmonising Australia’s workplace health and safety laws on workers compensation," GLO Discussion Paper Series 773, Global Labor Organization (GLO).
    3. Rahi Abouk & Keshar M. Ghimire & Johanna Catherine Maclean & David Powell, 2023. "Pain Management and Work Capacity: Evidence From Workers’ Compensation and Marijuana Legalization," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(3), pages 737-770, June.
    4. René Böheim & Thomas Leoni, 2020. "Do Employees’ Sickness Absences React to a Change in Costs for Firms? Evidence from a Natural Experiment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 553-581, April.
    5. Bilgrami, A. & Cutler, H. & Sinha, K., 2021. "Do standardised workplace health and safety laws and increased enforcement activities reduce the probability of receiving workers' compensation?," Health, Econometrics and Data Group (HEDG) Working Papers 21/08, HEDG, c/o Department of Economics, University of York.
    6. René Böheim & Thomas Leoni, 2014. "Firms' Sickness Costs and Workers' Sickness Absences," NBER Working Papers 20305, National Bureau of Economic Research, Inc.
    7. Johanna Catherine Maclean & Lauren Hersch Nicholas & Keshar M. Ghimire, 2017. "The Impact of State Medical Marijuana Laws on Social Security Disability Insurance and Workers' Compensation Benefit Claiming," Working Papers id:12111, eSocialSciences.
    8. Stefan Pichler & Nicolas R. Ziebarth, 2020. "Labor Market Effects of U.S. Sick Pay Mandates," Journal of Human Resources, University of Wisconsin Press, vol. 55(2), pages 611-659.
    9. Johanna Catherine Maclean & Keshar M. Ghimire & Lauren Hersch Nicholas, 2021. "Marijuana legalization and disability claiming," Health Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 453-469, February.
    10. Keshar M. Ghimire & Johanna Catherine Maclean, 2020. "Medical marijuana and workers' compensation claiming," Health Economics, John Wiley & Sons, Ltd., vol. 29(4), pages 419-434, April.
    11. Hansen, Benjamin & Nguyen, Tuan & Waddell, Glen R., 2017. "Benefit Generosity and Injury Duration: Quasi-Experimental Evidence from Regression Kinks," IZA Discussion Papers 10621, Institute of Labor Economics (IZA).
    12. MELISSA McINERNEY & KOSALI SIMON, 2012. "The Effect of State Workers’ Compensation Program Changes on the Use of Federal Social Security Disability Insurance," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(1), pages 57-88, January.
    13. Bronchetti, Erin Todd, 2012. "Workers' compensation and consumption smoothing," Journal of Public Economics, Elsevier, vol. 96(5), pages 495-508.
    14. Monica Galizzi & Roberto Leombruni & Lia Pacelli & Antonella Bena, 2014. "Wages and return to work of injured workers," LABORatorio R. Revelli Working Papers Series 139, LABORatorio R. Revelli, Centre for Employment Studies.

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