Pain Management and Work Capacity: Evidence From Workers’ Compensation and Marijuana Legalization

We study whether the work capacity of the older working population responds to improved pain management therapy access. We use the adoption of state recreational marijuana laws (RMLs) as a large policy shock to access to a non‐pharmaceutical pain management option. We focus on workers’ compensation cash benefit receipt as a measure of work capacity, finding that receipt declines in response to RML adoption. Workers’ compensation cash benefits are awarded to workers who require time away from work to recover from an injury, which arguably captures a policy‐relevant aspect of work capacity. We observe similar shifts in complementary proxies for work capacity, including work‐limiting disability rates. After considering a range of alternative mechanisms, the evidence suggests that the primary driver of the reductions in workers’ compensation benefits is improvements in work capacity.