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Effects of Workers' Compensation: A Survey

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  • Fortin, Bernard

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  • Lanoie, Paul

Abstract

This survey covers extensively the theoretical and the empirical work that was done on the incentive effects related to the existence of workers' compensation (WC) in the North American context. It first analyzes the economic rationale for compulsory WC. Then it studies the impact of WC on behavior. Three types of effects can be distinguished: 1) WC may influence frequency, duration and nature of claims through a variety of incentive effects. Under asymmetrical information about accident prevention activities, WC may affect safety behavior of both employers and employees and the risk level in the market place. Under asymmetrical information about the true nature of workplace injuries, insured workers may attempt to report false or off-the-job accidents and to undertake activities in order to obtain higher WC benefits, especially in the case of hard-to-diagnose injuries. Moreover, substitution between WC and other insurance programs may be observed. The decision of reporting a workplace accident may also be affected by the generosity of WC benefits. 2) WC may induce changes in occupational wages rates and 3) WC may affect firms' productivity. So far, the literature has focused mainly on the first type of effects. The main results show that increases in WC insurance are associated with an increase in the frequency of injuries (elasticities ranging from 0.4 to 1), and with an increase in the average duration of claims (elasticities ranging from 0.2 to 0.5). Furthermore, increases in WC are associated with more reporting of injuries that are hard-to-diagnose and, in the same line, there are some evidence (at least in Canada) of substitution between unemployment insurance and WC insurance. Lastly, there are empirical results showing that the presence of WC insurance induces important reductions in wage rates, while an emerging literature suggests that changes in WC insurance may also have negative productivity effects. Cette étude couvre un grand nombre des travaux théoriques et empiriques réalisés sur les effets incitatifs de l'existence d'indemnisation pour les accidentés du travail (IAT) dans le contexte nord- américain. Nous analysons d'abord la rationalité économique de l'indemnisation obligatoire des accidentés du travail. Nous étudions ensuite l'impact de l'IAT sur le comportement. On peut distinguer trois types d'effets : 1) l'IAT peut influencer la fréquence, la durée et la nature des réclamations à travers une variété d'effets incitatifs. Dans le cas d'information asymétrique sur les activités de prévention des accidents, l'IAT peut affecter les activités préventives des employés et des employeurs, ainsi que le niveau de risque sur le marché. Dans le cas d'information asymétrique sur la véritable nature des accidents du travail, les travailleurs assurés peuvent tenter de déclarer de faux accidents, ou des accidents survenus à l'extérieur de leur lieu de travail. Ils pourront aussi entreprendre certaines activités afin de bénéficier d'indemnisations plus élevées, particulièrement dans le cas de blessures difficiles à diagnostiquer. De plus, on peut observer une substitution entre l'IAT et d'autres programmes d'assurance. La décision de déclarer un accident du travail peut également être affectée par la générosité des prestations. 2) L'IAT peut modifier le taux de salaire des travailleurs et 3) l'IAT peut affecter la productivité de la firme. Jusqu'à présent, les écrits ont mis l'accent sur le premier type d'effets. Les principaux résultats montrent qu'une hausse de l'IAT est associée à une augmentation de la fréquence des blessures (élasticités entre 0.4 et 1), et à une hausse de la durée moyenne des réclamations (élasticités entre 0.2 et 0.5). Par ailleurs, on peut constater une relation positive entre l'accroissement de l'IAT et le nombre de blessures difficiles à diagnostiquer. Et, dans le même ordre d'idées, les études ont montré (du moins au Canada) qu'il s'effectue une substitution entre l'assurance chômage et l'assurance contre les accidents du travail. Enfin, des résultats empiriques ont montré que la présence de l'assurance contre les accidents du travail conduit à d'importantes réductions du taux de salaire, tandis qu'une nouvelle vague d'études suggère que les changements de l'assurance contre les accidents du travail peuvent également exercer un effet négatif sur la productivité.

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Bibliographic Info

Paper provided by Université Laval - Département d'économique in its series Cahiers de recherche with number 9816.

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Date of creation: 1998
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Handle: RePEc:lvl:laeccr:9816

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Keywords: Assurance; accidents du travail; sécurité du travail; incitation; salaires; productivité; Insurance; workers' compensation; occupational safety and health; incentives; wages; productivity;

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References

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Cited by:
  1. Michele Campolieti & Harry A. Krashinsky, 2003. "Substitution Between Disability Support Programs in Canada," Canadian Public Policy, University of Toronto Press, vol. 29(4), pages 417-429, December.
  2. G. Dionne & R. Gagné, 2000. "Replacement Cost Endorsement and Opportunistic Fraud in Automobile Insurance," THEMA Working Papers 2000-06, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  3. Pierre-André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory : A Survey of Some Recent Work," Working Papers 2002-11, Centre de Recherche en Economie et Statistique.
  4. Dhaval Dave & Robert Kaestner, 2009. "Health insurance and ex ante moral hazard: evidence from Medicare," International Journal of Health Care Finance and Economics, Springer, vol. 9(4), pages 367-390, December.

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