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The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance

In: Tax Policy and the Economy, Volume 5

Author

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  • Jonathan Gruber
  • Alan B. Krueger

Abstract

Workers' compensation insurance provides cash payments and medical benefits to workers who incur a work-related injury or illness. Many features of the workers' compensation program parallel features of proposed mandated employer-paid health insurance plans. This paper empirically examines the incidence of the workers' compensation program to infer the likely consequences of mandated health insurance proposals. In certain industries, such as trucking and carpentry, workers' compensation insurance costs are quite large, and vary tremendously within states over time, and across states at a moment in time. This variation is used to identify the incidence of the program. Empirical analysis of two data sets suggest that changes in employers' costs of workers' compensation insurance are largely shifted to employees in the form of lower wages. In addition, higher insurance costs are found to have a negative but statistically insignificant effect on employment. The implied elasticity of labor demand from our results is about -.50.
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Suggested Citation

  • Jonathan Gruber & Alan B. Krueger, 1991. "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance," NBER Chapters,in: Tax Policy and the Economy, Volume 5, pages 111-144 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:11270
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    References listed on IDEAS

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    1. Clark, Kim B & Freeman, Richard B, 1980. "How Elastic is the Demand for Labor?," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 509-520, November.
    2. Stuart Dorsey & Norman Walzer, 1983. "Workers' Compensation, Job Hazards, and Wages," ILR Review, Cornell University, ILR School, vol. 36(4), pages 642-654, July.
    3. Card, David, 1990. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," American Economic Review, American Economic Association, vol. 80(4), pages 669-688, September.
    4. Krueger, Alan B & Burton, John F, Jr, 1990. "The Employers' Costs of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 228-240, May.
    5. Jack E. Triplett, 1983. "The Measurement of Labor Cost," NBER Books, National Bureau of Economic Research, Inc, number trip83-1.
    6. Holmlund, Bertil, 1983. " Payroll Taxes and Wage Inflation: The Swedish Experience," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(1), pages 1-15.
    7. Duncan, Greg J & Hill, Daniel H, 1985. "An Investigation of the Extent and Consequences of Measurement Error in Labor-Economic Survey Data," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 508-532, October.
    8. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-350, April.
    9. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-183, May.
    10. Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 94(1), pages 113-134.
    11. Robert S. Smith, 1979. "Compensating Wage Differentials and Public Policy: A Review," ILR Review, Cornell University, ILR School, vol. 32(3), pages 339-352, April.
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    More about this item

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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