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Revisiting Incentive Effects in Workers' Compensation: Do Higher Benefits Really Induce More Claims?

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  • Erin Todd Bronchetti
  • Melissa McInerney

Abstract

An important question to ask regarding social insurance programs such as workers' compensation (WC) is to what extent do higher benefits lead to more claims? The authors of this study revisit incentive effects of WC, using 25 years of data (1977–2004) from the March Current Population Survey (CPS) to estimate the relationship between WC cash benefit levels and the frequency of WC receipt. Providing new evidence on the subject, they demonstrate that conclusions regarding workers' incentives to claim benefits differ dramatically depending upon how one controls for the confounding influence of an individual's past earnings. The authors' expanded empirical specifications, which include flexible earnings controls, yield benefit-participation elasticities smaller than 0.1. Their findings suggest that WC claims are not particularly responsive to changes in benefit levels and that labor supply disincentives may warrant less concern than economists or policymakers have typically exhibited. The authors also find that WC receipt was less responsive to benefit variation after 1990 than in previous years.

Suggested Citation

  • Erin Todd Bronchetti & Melissa McInerney, 2012. "Revisiting Incentive Effects in Workers' Compensation: Do Higher Benefits Really Induce More Claims?," ILR Review, Cornell University, ILR School, vol. 65(2), pages 286-315, April.
  • Handle: RePEc:sae:ilrrev:v:65:y:2012:i:2:p:286-315
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    Cited by:

    1. Pichler, Stefan & Ziebarth, Nicolas R., 2016. "Labor Market Effects of US Sick Pay Mandates," IZA Discussion Papers 9867, Institute of Labor Economics (IZA).
    2. Johanna Catherine Maclean & Keshar M. Ghimire & Lauren Hersch Nicholas, 2017. "Medical Marijuana Laws and Disability Applications, Receipts, and Terminations," NBER Working Papers 23862, National Bureau of Economic Research, Inc.
    3. René Böheim & Thomas Leoni, 2014. "Firms' Sickness Costs and Workers' Sickness Absences," NBER Working Papers 20305, National Bureau of Economic Research, Inc.
    4. Dillender, Marcus, 2015. "The effect of health insurance on workers’ compensation filing: Evidence from the affordable care act's age-based threshold for dependent coverage," Journal of Health Economics, Elsevier, vol. 43(C), pages 204-228.
    5. Johanna Catherine Maclean & Lauren Hersch Nicholas & Keshar M. Ghimire, 2017. "The Impact of State Medical Marijuana Laws on Social Security Disability Insurance and Workers' Compensation Benefit Claiming," Working Papers id:12111, eSocialSciences.
    6. Hansen, Benjamin & Nguyen, Tuan & Waddell, Glen R., 2017. "Benefit Generosity and Injury Duration: Quasi-Experimental Evidence from Regression Kinks," IZA Discussion Papers 10621, Institute of Labor Economics (IZA).

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