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Medical Care Spending and Labor Market Outcomes: Evidence from Workers' Compensation Reforms

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  • David Powell
  • Seth Seabury

Abstract

Medical care represents an important component of workers' compensation benefits with the potential to improve health and post- injury labor outcomes, but little is known about the relationship between medical care spending and the labor outcomes of injured workers. We exploit the 2003–2004 California workers' compensation reforms which reduced medical spending disproportionately for workers incurring low back injuries. We link administrative claims data to earnings records for injured workers and their uninjured coworkers. We find that workers with low back injuries experienced a 7.6% post-reform decline in medical care, and an 8.1% drop in post-injury earnings relative to other injured workers.

Suggested Citation

  • David Powell & Seth Seabury, 2018. "Medical Care Spending and Labor Market Outcomes: Evidence from Workers' Compensation Reforms," American Economic Review, American Economic Association, vol. 108(10), pages 2995-3027, October.
    • Handle: RePEc:aea:aecrev:v:108:y:2018:i:10:p:2995-3027
    Note: DOI: 10.1257/aer.20150912
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    Cited by:

    1. Olaide Sekinat Opeloyeru & Temitope Olanike Faronbi & Isiaka Akande Raifu, 2024. "The Role of Institutional Quality in Health Expenditure-Labor Force Participation Nexus in Africa," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 2241-2273, March.
    2. Usala, Cristian & Primerano, Ilaria & Santelli, Francesco & Ragozini, Giancarlo, 2024. "The more the better? How degree programs’ variety affects university students’ churn risk," Socio-Economic Planning Sciences, Elsevier, vol. 94(C).
    3. Koen Jochmans & Vincenzo Verardi, 2022. "Instrumental‐variable estimation of exponential‐regression models with two‐way fixed effects with an application to gravity equations," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(6), pages 1121-1137, September.
    4. Burra, Lavan T. & Sommer, Stephan & Vance, Colin, 2023. "Free-Ridership in Subsidies for Company- and Private Electric Vehicles," Ruhr Economic Papers 1015, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Maclean, J. Catherine & Pichler, Stefan & Ziebarth, Nicolas R., 2020. "Mandated Sick Pay: Coverage, Utilization, and Welfare Effects," IZA Discussion Papers 13132, Institute of Labor Economics (IZA).
    6. Xiuming Dong & Johanna Catherine Maclean & David Powell, 2024. "Social Insurance Spillovers: Evidence From Paid Sick Leave Mandates and Workers' Compensation," NBER Working Papers 32751, National Bureau of Economic Research, Inc.
    7. Wang, Zhenxuan & Zhang, Junjie, 2023. "The value of information disclosure: Evidence from mask consumption in China," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).
    8. Liu, Wei & Zhao, Zhihui & Wen, Zhao & Cheng, Shixiong, 2022. "Environmental regulation and OFDI: Evidence from Chinese listed firms," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 191-208.
    9. Di Dong & Rong Ran & Bingsheng Liu & Jinfeng Zhang & Chengcheng Song & Jing Wang, 2024. "Recentralization and the long‐lasting effect of campaign‐style enforcement: From the perspective of authority allocation," Review of Policy Research, Policy Studies Organization, vol. 41(1), pages 239-275, January.
    10. Pichler, Stefan & Ziebarth, Nicolas R., 2024. "Sick Leave and Medical Leave in the United States: A Categorization and Recent Trends," IZA Policy Papers 206, Institute of Labor Economics (IZA).
    11. Philip Armour & Catria Gadwah‐Meaden, 2025. "Veteran Affairs disability compensation: Likely the U.S.’s largest disability program, but what do we know about its impacts on service‐disabled veterans?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 44(1), pages 304-314, January.
    12. Broten, Nicholas & Dworsky, Michael & Powell, David, 2022. "Do temporary workers experience additional employment and earnings risk after workplace injuries?," Journal of Public Economics, Elsevier, vol. 209(C).
    13. Sarah Tahamont & Zubin Jelveh & Aaron Chalfin & Shi Yan & Benjamin Hansen, 2019. "Administrative Data Linking and Statistical Power Problems in Randomized Experiments," NBER Working Papers 25657, National Bureau of Economic Research, Inc.
    14. 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.
    15. Li Su & Mingxiao Sha & Ruixue Liu, 2024. "Medical insurance, labor supply, and anti‐poverty initiatives: Micro‐evidence from China," International Studies of Economics, John Wiley & Sons, vol. 19(2), pages 268-292, June.
    16. J. M. C. Santos Silva & Silvana Tenreyro, 2022. "The Log of Gravity at 15," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(3), pages 423-437, September.
    17. Marika Cabral & Marcus Dillender, 2024. "The Impact of Benefit Generosity on Workers' Compensation Claims: Evidence and Implications," American Economic Journal: Applied Economics, American Economic Association, vol. 16(3), pages 436-481, July.
    18. Alacevich, Caterina & Nicodemo, Catia, 2019. "Immigration and Work-Related Injuries: Evidence from Italian Administrative Data," IZA Discussion Papers 12510, Institute of Labor Economics (IZA).
    19. Dillender, Marcus & Jinks, Lu & Lo Sasso, Anthony T., 2023. "When (and why) providers do not respond to changes in reimbursement rates," Journal of Public Economics, Elsevier, vol. 217(C).
    20. Burra, Lavan T. & Sommer, Stephan & Vance, Colin, 2024. "Free-ridership in subsidies for company- and private electric vehicles," Energy Economics, Elsevier, vol. 131(C).
    21. Cronin, C.J.; & Harris, M. C.; & Ziebarth, N. R.;, 2024. "The Anatomy of U.S. Sick Leave Schemes:Evidence from Public School Teachers," Health, Econometrics and Data Group (HEDG) Working Papers 24/10, HEDG, c/o Department of Economics, University of York.

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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