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Incentive Effects of Workers' Compensation Insurance

  • Alan B. Krueger

This paper uses Current Population Survey data on a large sample of workers to estimate the determinants of participation in state workers' compensation programs in the United States. The principal finding is Chat higher workers' compensation benefits are associated with greater participation in the workers' compensation program, after accounting for worker characteristics, state fixed effects, and other aspects of the workers' compensation law. Moreover, this result holds for both manufacturing and non-manufacturing workers. Workers' compensation benefits, however, have an insignificant effect on program participation for the sample of women. Overall, a 10% increase in benefits is associated with a 6.7% increase in program participation. In addition, the results show that the waiting period that is required before benefit payments begin has a substantial negative effect on participation in the workers' compensation program. Finally, the parameters of the cross-sectional model are used to simulate the aggregate workers' compensation incidence rate from 1969 to 1987. The growth in workers' compensation claims in the 1970s appears to correspond reasonably well co the growth in real benefits that occurred during this time period.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3089.

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Date of creation: Nov 1990
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Publication status: published as Journal of Public Economics, Vol. 41, No. 1, pp. 73-99, (1990).
Handle: RePEc:nbr:nberwo:3089
Note: LS
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  1. John W. Ruser, 1985. "Workers' Compensation Insurance, Experience-Rating, and Occupational Injuries," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 487-503, Winter.
  2. Daniel R. Feenberg & Harvey S. Rosen, 1986. "State Personal Income and Sales Taxes, 1977–1983," NBER Chapters, in: Studies in State and Local Public Finance, pages 135-186 National Bureau of Economic Research, Inc.
  3. Butler, Richard J & Worrall, John D, 1983. "Workers' Compensation: Benefit and Injury Claims Rates in the Seventies," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 580-89, November.
  4. Alan B. Krueger & John F. Burton, Jr., 1989. "The Employers' cost of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy," NBER Working Papers 3029, National Bureau of Economic Research, Inc.
  5. Rea, Samuel A, Jr, 1981. "Workmen's Compensation and Occupational Safety under Imperfect Information," American Economic Review, American Economic Association, vol. 71(1), pages 80-93, March.
  6. Ronald G. Ehrenberg, 1985. "Workers' Compensation, Wages, and the Risk of Injury," NBER Working Papers 1538, National Bureau of Economic Research, Inc.
  7. Carmichael, H Lorne, 1986. "Reputations for Safety: Market Performance and Policy Remedies," Journal of Labor Economics, University of Chicago Press, vol. 4(4), pages 458-72, October.
  8. Viscusi, W. Kip, 1980. "Imperfect job risk information and optimal workmen's compensation benefits," Journal of Public Economics, Elsevier, vol. 14(3), pages 319-337, December.
  9. Bartel, Ann P & Thomas, Lacy Glenn, 1985. "Direct and Indirect Effects of Regulation: A New Look at OSHA's Impact," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 1-25, April.
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