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Workers' Compensation and Injury Duration: Evidence from a Natural Experiment

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Author Info
Bruce D. Meyer
W. Kip Viscusi
David L. Durbin

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Abstract

This paper examines the effect of workers' compensation on the time until an injured worker returns to work. Two large increases in the maximum weekly benefit amount in Kentucky am Michigan are examined. The increases raised the benefit amount for high earnings individuals by over sixty percent, while low earnings individuals, who did not earn enough to be eligible for the old maximum, did not experience a change in their incentives. A comparison of the behavior of pecp1e injured the year before the benefit increases to those injured the year after provides an estimate of the effect of higher benefits on injury duration. This use of a "natural experiment" allows us to separate the effect of the level of the benefits from the effect of previous earnings, which is a common difficulty in the analysis of social insurance programs. The analysis uses individual records from a large number of insurance companies. Time out of work increases dramatically for those groups eligible for the higher benefits, while those whose benefits do not change do not experience a change in duration. The estimates suggest large moral hazard effects of higher benefits, with the estimated elasticity of spell duration with respect to benefits of approximately .3 to .4.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3494.

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Date of creation: Nov 1990
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Handle: RePEc:nbr:nberwo:3494

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alan B. Krueger, 1990. "Incentive Effects of Workers' Compensation Insurance," NBER Working Papers 3089, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Alan Krueger, 1990. "Worker's Compensation Insurance and the Duration of Workplace Injuries," Working Papers 641, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  3. Ronald G. Ehrenberg, 1989. "Workers' Compensation, Wages, and the Risk of Injury," NBER Working Papers 1538, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. repec:fth:prinin:261 is not listed on IDEAS
  5. Butler, Richard J & Worrall, John D, 1983. "Workers' Compensation: Benefit and Injury Claims Rates in the Seventies," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 580-89, November. [Downloadable!] (restricted)
  6. Finis Welch, 1977. "What have we learned from empirical studies of unemployment insurance?," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 30(4), pages 451-461, July.
  7. Butler, Richard J & Worrall, John D, 1985. "Work Injury Compensation and the Duration of Nonwork Spells," Economic Journal, Royal Economic Society, vol. 95(379), pages 714-24, September. [Downloadable!] (restricted)
  8. Bruce D. Meyer, 1989. "A Quasi-Experimental Approach to the Effects of Unemployment Insurance," NBER Working Papers 3159, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Skogman Thoursie, Peter, 2002. "Reporting Sick: Are Sporting Events Contagious?," Research Papers in Economics 2002:4, Stockholm University, Department of Economics. [Downloadable!]
  2. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  3. Ruth Miquel, 2003. "Identification of Effects of Dynamic Treatments with a Difference-in-Differences Approach," University of St. Gallen Department of Economics working paper series 2003 2003-06, Department of Economics, University of St. Gallen. [Downloadable!]
  4. Lynn A. Karoly & Paul S. Davies, 2004. "The Impact of the 1996 SSI Childhood Disability Reforms: Evidence from Matched SIPP-SSA Data," Working Papers wp079, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  5. Kelly Edmiston, 2005. "Worker's compensation and state employment growth," Community Affairs Research Working Paper 2005-04, Federal Reserve Bank of Kansas City. [Downloadable!]
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  6. Susan Athey & Guido W. Imbens, 2002. "Identification and Inference in Nonlinear Difference-In-Differences Models," NBER Technical Working Papers 0280, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. David Card & Brian P. McCall, 2006. "When to Start a Fight and When to Fight Back: Liability Disputes in the Workers' Compensation System," NBER Working Papers 11918, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Vikström, Johan, 2009. "Cluster sample inference using sensitivity analysis: the case with few groups," Working Paper Series 2009:15, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  9. Sarah Crichton & Steven Stillman & Dean Hyslop, 2005. "Returning to Work from Injury: Longitudinal Evidence on Employment and Earnings," IZA Discussion Papers 1857, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Bruce D. Meyer, 1994. "Natural and Quasi- Experiments in Economics," NBER Technical Working Papers 0170, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Nordberg, Morten & Kverndokk, Snorre, 2009. "Absenteeism, Health Insurance, and Business Cycles," HERO On line Working Paper Series 2003:17, Oslo University, Health Economics Research Programme. [Downloadable!]
  12. Boone, J. & Ours, J.C. van, 2002. "Cyclical fluctuations in workplace accidents," Discussion Paper 98, Tilburg University, Center for Economic Research. [Downloadable!]
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  13. Denis Bolduc & Bernard Fortin & France Labrecque & Paul Lanoie, 1997. "Incentive Effects of Public Insurance Programs on the Occurence and the Composition of Workplace Injuries," CIRANO Working Papers 97s-24, CIRANO. [Downloadable!]
  14. Gary Chamberlain & Guido W. Imbens, 1996. "Nonparametric Applications of Bayesian Inference," NBER Technical Working Papers 0200, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Ziebarth, N, 2009. "“Do I really need to go to rehab? I’d say no, no, no.” Estimating Price Elasticities of Convalescent Care Programs," Health, Econometrics and Data Group (HEDG) Working Papers 09/27, HEDG, c/o Department of Economics, University of York. [Downloadable!]
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  16. Guido Imbens & Charles F. Manski, 2003. "Confidence intervals for partially identified parameters," CeMMAP working papers CWP09/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
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  17. Bernard Fortin & Paul Lanoie, 1998. "Effects of Workers' Compensation: A Survey," CIRANO Working Papers 98s-04, CIRANO. [Downloadable!]
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  18. Jan Høgelund, & Anders Holm & James McIntosh, 2009. "Does graded return to work improve disabled workers’ labor market attachment?," CAM Working Papers 2009-06, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
  19. Cockx, Bart & Ridder, Geert, 1996. "Social employment of welfare recipients in Belgium: an evaluation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1996018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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  20. Rocio Sánchez-Mangas & Virginia Sánchez-Marcos, . "Reconciling female labor participation and motherhood: the effect of benefits for working mothers," Studies on the Spanish Economy 195, FEDEA. [Downloadable!]
  21. Glenn W. Harrison, 2005. "Field Experiments and Control," Artefactual Field Experiments 0049, The Field Experiments Website. [Downloadable!]
  22. Alan B. Krueger & Bruce D. Meyer, 2002. "Labor Supply Effects of Social Insurance," NBER Working Papers 9014, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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