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

  • Jonathan Gruber
  • Alan B. Krueger

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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3557.

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Date of creation: Dec 1990
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Publication status: published as The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance , Jonathan Gruber, Alan B. Krueger. in Tax Policy and the Economy, Volume 5 , Bradford. 1991
Handle: RePEc:nbr:nberwo:3557
Note: LS PE
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  1. Stuart Dorsey & Norman Walzer, 1983. "Workers' Compensation, Job Hazards, and Wages," ILR Review, Cornell University, ILR School, vol. 36(4), pages 642-654, July.
  2. 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.
  3. Robert S. Smith, 1979. "Compensating wage differentials and public policy: A review," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 32(3), pages 339-362, April.
  4. Kim B. Clark & Richard B. Freeman, 1979. "How Elastic is The Demand for Labor?," NBER Working Papers 0309, National Bureau of Economic Research, Inc.
  5. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May.
  6. Orley Ashenfelter & Robert Smith, 1977. "Compliance with the Minimum Wage Law," Working Papers 478, Princeton University, Department of Economics, Industrial Relations Section..
  7. David Card, 1988. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," Working Papers 612, Princeton University, Department of Economics, Industrial Relations Section..
  8. Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 94(1), pages 113-134.
  9. Holmlund, Bertil, 1983. "Payroll Taxes and Wage Inflation: The Swedish Experiences," Working Paper Series 68, Research Institute of Industrial Economics.
  10. Stuart Dorsey & Norman Walzer, 1983. "Workers' compensation, job hazards, and wages," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 36(4), pages 642-654, July.
  11. 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 508-32, October.
  12. 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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