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Opting out of Workers' Compensation: Non-Subscription in Texas and Its Effects

Author

Listed:
  • Jinks, Lu

    (University of Illinois at Chicago)

  • Kniesner, Thomas J.

    () (Claremont Graduate University)

  • Leeth, John D.

    () (Bentley University)

  • Lo Sasso, Anthony T.

    () (University of Illinois at Chicago)

Abstract

Texas is the only state that does not mandate that employers carry workers' compensation insurance (WC) coverage. We employ a quasi-experimental design paired with a novel machine learning approach to examine the effects of switching from traditional workers' compensation to a so-called non-subscription program in Texas. Specifically, we compare before and after effects of switching to non-subscription for employees in Texas to contemporaneously measured before and after differences for non-Texas-based employees. Importantly, we study large self-insured companies operating the same business in multiple states in the US; hence the non-Texas operations represent the control sites for the Texas treatment sites. The resulting difference-in-differences estimation technique allows us to control for any companywide factors that might be confounded with switching to non-subscription. Our empirical approach also controls for injury characteristics, employment characteristics, industry, and individual characteristics such as gender, age, number of dependents, and marital status. Outcomes include number of claims reported, medical expenditures, indemnity payments, time to return to work, likelihood of having permanent disability, likelihood of claim denial, and likelihood of litigation. The data include 25 switcher companies between the years 2004 and 2016, yielding 846,376 injury incidents. Regression findings suggest that indemnity, medical payments, and work-loss fall substantially. Claim denials increase and litigation falls.

Suggested Citation

  • Jinks, Lu & Kniesner, Thomas J. & Leeth, John D. & Lo Sasso, Anthony T., 2019. "Opting out of Workers' Compensation: Non-Subscription in Texas and Its Effects," IZA Discussion Papers 12290, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp12290
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    References listed on IDEAS

    as
    1. Alexandre Belloni & Victor Chernozhukov & Christian Hansen, 2014. "Inference on Treatment Effects after Selection among High-Dimensional Controlsâ€," Review of Economic Studies, Oxford University Press, vol. 81(2), pages 608-650.
    2. Alison Morantz, 2010. "Opting Out of Workers' Compensation in Texas: A Survey of Large, Multistate Nonsubscribers," NBER Chapters, in: Regulation vs. Litigation: Perspectives from Economics and Law, pages 197-238, National Bureau of Economic Research, Inc.
    3. Krueger, Alan B., 1990. "Incentive effects of workers' compensation insurance," Journal of Public Economics, Elsevier, vol. 41(1), pages 73-99, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    workers' compensation insurance; non-subscription; difference-in-differences; triple differences; machine learning; PDS-LASSO;

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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