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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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    7. 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.
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    Cited by:

    1. Jonathan Gruber & Aaron Yelowitz, 1999. "Public Health Insurance and Private Savings," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1249-1274, December.
    2. Meng-Na Xu & Ming-Lin Wang, 2015. "Individual perception of accessible social capital and attitude to thrift," Review of Economics of the Household, Springer, vol. 13(3), pages 487-500, September.
    3. Fishback, Price V & Kantor, Shawn Everett, 1998. "The Adoption of Workers' Compensation in the United States, 1900-1930," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 305-341, October.
    4. Shin-Yi Chou & Jin-Tan Liu & James Hammitt, 2006. "Households’ precautionary behaviors—the effects of the introduction of National Health Insurance in Taiwan," Review of Economics of the Household, Springer, vol. 4(4), pages 395-421, December.
    5. Bai, Chong-En & Wu, Binzhen, 2014. "Health insurance and consumption: Evidence from China’s New Cooperative Medical Scheme," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 450-469.
    6. Chou, Shin-Yi & Liu, Jin-Tan & Hammitt, James K., 2003. "National Health Insurance and precautionary saving: evidence from Taiwan," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1873-1894, September.
    7. Di Matteo, Livio & Herbert Emery, J. C., 2002. "Wealth and the demand for life insurance: evidence from Ontario, 1892," Explorations in Economic History, Elsevier, vol. 39(4), pages 446-469, October.
    8. Melissa A. Thomasson, 2003. "The Importance of Group Coverage: How Tax Policy Shaped U.S. Health Insurance," American Economic Review, American Economic Association, vol. 93(4), pages 1373-1384, September.
    9. Hartwick, John M., 1999. "Insuring and u'''(y)," Economics Letters, Elsevier, vol. 65(2), pages 205-212, November.
    10. John A. James & Michael G. Palumbo & Mark Thomas, 2007. "Consumption smoothing among working-class American families before social insurance," Oxford Economic Papers, Oxford University Press, vol. 59(4), pages 606-640, October.
    11. Fishback, Price V. & Kantor, Shawn Everett, 1998. "The Political Economy of Workers' Compensation Benefit Levels, 1910-1930," Explorations in Economic History, Elsevier, vol. 35(2), pages 109-139, April.
    12. Saito, Makoto & Shiratsuka, Shigenori, 2003. "Precautionary Motives versus Waiting Options: Evidence from Aggregate Household Saving in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(3), pages 1-20, October.
    13. Alan De Bromhead & Karol Jan Borowiecki, 2016. "Immigration and the demand for life insurance: evidence from Canada, 1911," European Review of Economic History, Oxford University Press, vol. 20(2), pages 147-175.
    14. Eric Helland & Anupam B. Jena & Dan P. Ly & Seth A. Seabury, 2016. "Self-insuring against Liability Risk: Evidence from Physician Home Values in States with Unlimited Homestead Exemptions," NBER Working Papers 22031, National Bureau of Economic Research, Inc.
    15. Kose, Esra & Kuka, Elira & Shenhav, Na'ama, 2016. "Women's Enfranchisement and Children's Education: The Long-Run Impact of the U.S. Suffrage Movement," IZA Discussion Papers 10148, Institute for the Study of Labor (IZA).
    16. Shin-Yi Chou & Jin-Tan Liu & James K. Hammitt, 2002. "Health Insurance and Households' Precautionary Behaviors - An Unusual Natural Experiment," NBER Working Papers 9394, National Bureau of Economic Research, Inc.
    17. Emery, J.C. Herbert, 2010. ""Un-American" or unnecessary? America's rejection of compulsory government health insurance in the Progressive Era," Explorations in Economic History, Elsevier, vol. 47(1), pages 68-81, January.
    18. J.C. Herbert Emery, "undated". "America’s Rejection of Compulsory Government Health Insurance in the Progressive Era and its Legacy for National Insurance Today," Working Papers 2008-23, Department of Economics, University of Calgary, revised 01 Apr 2008.
    19. Meiling Ying & Zaichao Du, 2012. "The effects of medical insurance on durables consumption in rural China," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(2), pages 176-187, May.
    20. Terada-Hagiwara, Akiko, 2009. "Explaining Filipino Households’ Declining Saving Rate," ADB Economics Working Paper Series 178, Asian Development Bank.
    21. Lee, Daeyong, 2016. "Effects of dependent coverage mandate on household precautionary savings: Evidence from the 2010 Affordable Care Act," Economics Letters, Elsevier, vol. 147(C), pages 32-37.
    22. Makki, Shiva S. & Miranda, Mario J., 1998. "Self-Insurance And The Utility Of Standard Risk Management Contracts," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20975, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    23. Gottlieb, Daniel, 2007. "Asymmetric information in late 19th century cooperative insurance societies," Explorations in Economic History, Elsevier, vol. 44(2), pages 270-292, April.
    24. Lehmann-Hasemeyer, Sibylle & Streb, Jochen, 2017. "Does Social Security crowd out Private Savings? The Case of Bismarck’s System of Social Insurance," IBF Paper Series 06-17, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.

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