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Precautionary Saving, Insurance, and the Origins of Workers' Compensation

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  • Kantor, Shawn Everett
  • Fishback, Price V

Abstract

In this article, the authors test whether the introduction of social insurance has led to a reduction in private insurance purchases and precautionary saving by examining the introduction of workers' compensation. Their empirical analysis is based on the financial decisions of over 7,000 households surveyed for the 1917-19 Bureau of Labor Statistics cost-of-living study. The authors find that the presence of workers' compensation at least partially crowded out private accident insurance and led to a substantial reduction in precautionary saving. The introduction of workers' compensation caused private saving to fall by approximately 25 percent, with other factors held constant. Copyright 1996 by University of Chicago Press.

Suggested Citation

  • Kantor, Shawn Everett & Fishback, Price V, 1996. "Precautionary Saving, Insurance, and the Origins of Workers' Compensation," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 419-442, April.
  • Handle: RePEc:ucp:jpolec:v:104:y:1996:i:2:p:419-42
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    References listed on IDEAS

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    1. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    2. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-391, April.
    3. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
    4. Hubbard, R. Glenn & Skinner, Jonathan & Zeldes, Stephen P., 1994. "The importance of precautionary motives in explaining individual and aggregate saving," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 59-125, June.
    5. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    6. Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
    7. Leimer, Dean R & Lesnoy, Selig D, 1982. "Social Security and Private Saving: New Time-Series Evidence," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 606-629, June.
    8. Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 82(3), pages 465-473.
    9. David M. Cutler & Jonathan Gruber, 1995. "Does Public Insurance Crowd Out Private Insurance?," NBER Working Papers 5082, National Bureau of Economic Research, Inc.
    10. Laurence J. Kotlikoff, 1989. "What Determines Savings?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611872, January.
    11. Cantor, Richard, 1985. "The consumption function and the precautionary demand for savings," Economics Letters, Elsevier, vol. 17(3), pages 207-210.
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