Privatizing public services and strategic behavior: The impact of incentives to reduce workers' compensation claim duration
During the 1990s, the state of Ohio contracted out Workers' Compensation (WC) case management, incorporating a large bonus payment intended to reward reduced claim duration. The bonus is essentially a decreasing function of average days away from work, excluding claims longer than 15 months. In response, duration is predicted to decrease for claims with moderate injuries and increase for some severe claims so that claimants will miss more than 15 months of work and be excluded from the calculation. I show that contractors increased duration for severe claims but find no evidence that contractors successfully reduced duration for moderate claims. However, contractors received large bonus payments. This is likely because the financial reward to merely excluding a small share of severe claims from the calculation of the bonus payment is large enough to enable TCMs to receive the full bonus. These contractor responses are inconsistent with state intentions, suggesting public entities should anticipate strategic behavior when crafting performance-based incentives.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- James J. Heckman & Carolyn Heinrich & Jeffrey Smith, 2002.
"The Performance of Performance Standards,"
Journal of Human Resources,
University of Wisconsin Press, vol. 37(4), pages 778-811.
- Heckman, James J. & Heinrich, Carolyn J. & Smith, Jeffrey A., 2002. "The Performance of Performance Standards," IZA Discussion Papers 525, Institute for the Study of Labor (IZA).
- James Heckman & Carolyn Heinrich & Jeffrey Smith, 2002. "The Performance of Performance Standards," NBER Working Papers 9002, National Bureau of Economic Research, Inc.
- David Neumark & Peter S. Barth & Richard A. Victor, 2007. "The Impact of Provider Choice on Workers' Compensation Costs and Outcomes," ILR Review, Cornell University, ILR School, vol. 61(1), pages 121-142, October.
- David Neumark & Peter S. Barth & Richard Victor, 2005. "The Impact of Provider Choice on Workers' Compensation Costs and Outcomes," NBER Working Papers 11855, National Bureau of Economic Research, Inc.
- Jeff Biddle & Karen Roberts, 2003. "Claiming Behavior in Workers' Compensation," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(4), pages 759-780.
- Meyer, Bruce D & Viscusi, W Kip & Durbin, David L, 1995. "Workers' Compensation and Injury Duration: Evidence from a Natural Experiment," American Economic Review, American Economic Association, vol. 85(3), pages 322-340, June.
- Bruce D. Meyer & W. Kip Viscusi & David L. Durbin, 1990. "Workers' Compensation and Injury Duration: Evidence from a Natural Experiment," NBER Working Papers 3494, National Bureau of Economic Research, Inc.
- Anonymous, 2007. "Selected Paper Abstracts, Annual Meeting," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 39(02), August.
- Duggan, Mark, 2004. "Does contracting out increase the efficiency of government programs? Evidence from Medicaid HMOs," Journal of Public Economics, Elsevier, vol. 88(12), pages 2549-2572, December.
- Mark Duggan, 2002. "Does Contracting Out Increase the Efficiency of Government Programs? Evidence from Medicaid HMOs," NBER Working Papers 9091, National Bureau of Economic Research, Inc.
- Arild Aakvik & Egil Kjerstad, 2003. "Skill formation among vocational rehabilitation clients - public policy vs private incentives," Education Economics, Taylor & Francis Journals, vol. 11(3), pages 219-237.
- Aakvik, Arild & Kjerstad, Egil, 2002. "Skill Formation among Vocational Rehabilitation Clients – Public Policy vs Private Incentives," Working Papers in Economics 01/02, University of Bergen, Department of Economics.
- Aakvik, Arild & Kjerstad, Egil, 2002. "Skill formation among vocational rehabilitation clients - public policy vs private incentives," Working paper Series 0201, Department of Economics, University of Bergen.
- Pascal Courty & Gerald Marschke, 2008. "A General Test for Distortions in Performance Measures," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 428-441, August.
- מחקר - ביטוח לאומי, 2007. "Annual Survey 2006," Working Papers 20, National Insurance Institute of Israel.
- 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 714-724, September.
- Frank Neuhauser & Steven Raphael, 2004. "The Effect of an Increase in Worker's Compensation Benefits on the Duration and Frequency of Benefit Receipt," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 288-302, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:94:y:2010:i:9-10:p:777-789. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.