The Closure Effect: Evidence from Workers Compensation Litigation

25 Pages Posted: 6 Jan 2010 Last revised: 23 Oct 2010

See all articles by Henry R. Hyatt

Henry R. Hyatt

U.S. Census Bureau - Center for Economic Studies

Date Written: January 1, 2010

Abstract

Consideration of the “best interests” of Workers Compensation (WC) claimants often involves the assumption that those who receive benefits in a “lump-sum” behave “too myopically” with respect to labor supply. However, many attorneys argue that lump-sum settlements induce a beneficial “sense of closure.” In this paper, I provide an empirical context for these ideas using a unique set of linked administrative databases owned by the State of California. Upon receipt of a court-approved lump-sum settlement, WC claimants immediately increase labor supply. No such change is found for claimants who receive a court-approved settlement in which the insurer provides benefits over time, suggesting that the method of litigation settlement is a determinant of labor supply.

JEL Classification: K41, J32, H53

Suggested Citation

Hyatt, Henry R., The Closure Effect: Evidence from Workers Compensation Litigation (January 1, 2010). US Census Bureau Center for Economic Studies Paper No. CES-WP-10-01, Available at SSRN: https://ssrn.com/abstract=1531603 or http://dx.doi.org/10.2139/ssrn.1531603

Henry R. Hyatt (Contact Author)

U.S. Census Bureau - Center for Economic Studies ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

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