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Firm Accommodation After Disability: Labor Market Impacts and Implications for Social Insurance

Author

Listed:
  • Naoki Aizawa
  • Corina Mommaerts
  • Stephanie L. Rennane

Abstract

This paper studies the labor market impacts of firm accommodation decisions and assesses implications for the design of social insurance for workplace disability. We leverage a unique workers’ compensation (WC) program in Oregon that provides wage subsidies to firms for accommodating injured workers. Exploiting rich administrative data and a policy change to the wage subsidy, we show that accommodation rates respond to the subsidy rate and that receipt of accommodation leads to a significant increase in employment and earnings a year later. To explore welfare implications, we develop and estimate a frictional labor market model of accommodation as a form of human capital investment. Worker turnover and imperfect experience rating in WC lead to under-accommodation and inefficient labor market outcomes after workplace disability. Counterfactual simulations show that subsidizing accommodation not only improves long-run labor market outcomes of workers experiencing work-related disability but also leads to welfare gains for most workers.

Suggested Citation

  • Naoki Aizawa & Corina Mommaerts & Stephanie L. Rennane, 2023. "Firm Accommodation After Disability: Labor Market Impacts and Implications for Social Insurance," NBER Working Papers 31978, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31978
    Note: AG EH LS PE
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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H0 - Public Economics - - General
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy

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