The Closure Effect: Evidence from Workers Compensation Litigation
AbstractConsideration of the "best interests" of Workers Compensation (WC) claimants often involves the assumption that those who receive benefits in a "lump-sum" behave "too myopically" with respect to labor supply. However, many attorneys argue that lump-sum settlements induce a beneficial "sense of closure." In this paper, I provide an empirical context for these ideas using a unique set of linked administrative databases owned by the State of California. Upon receipt of a court-approved lump-sum settlement, WC claimants immediately increase labor supply. No such change is found for claimants who receive a court-approved settlement in which the insurer provides benefits over time, suggesting that the method of litigation settlement is a determinant of labor supply.
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Bibliographic InfoPaper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 10-01.
Length: 25 pages
Date of creation: Jan 2010
Date of revision:
Find related papers by JEL classification:
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-23 (All new papers)
- NEP-LAB-2010-01-23 (Labour Economics)
- NEP-LAW-2010-01-23 (Law & Economics)
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