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Benefit Generosity and Injury Duration: Quasi-Experimental Evidence from Regression Kinks

43 Pages Posted: 26 Mar 2017  

Benjamin Hansen

University of Oregon - Department of Economics; NBER; IZA

Tuan Nguyen

University of Oregon

Glen R. Waddell

University of Oregon - Department of Economics; Institute for the Study of Labor (IZA)

Abstract

In this paper, we investigate the effect of benefit generosity on claim duration and temporary benefits paid among temporary disability claims for workers' compensation. While previous studies have focused on natural experiments created by one-time large changes in minimum or maximum weekly benefits, we exploit variation around a kink in benefit generosity inherent in all workers' compensation systems in the United States. Using administrative data on the universe of injured workers in Oregon, we also find that more-generous benefits leads to longer injuries, but with implied elasticities that are smaller than the average elasticity from previous difference-in-difference studies. Our preferred estimates suggest that a 10-percent increase in benefit generosity leads to a 2- to 4-percent increase in injury duration. We derive similar duration-benefit elasticities when studying changes in benefits paid at the kink. We also introduce the first evidence that more-generous benefits encourage subsequent claim filing.

Keywords: worker compensation, moral hazard, regression kink

JEL Classification: I18, J33, J53

Suggested Citation

Hansen, Benjamin and Nguyen, Tuan and Waddell, Glen R., Benefit Generosity and Injury Duration: Quasi-Experimental Evidence from Regression Kinks. IZA Discussion Paper No. 10621. Available at SSRN: https://ssrn.com/abstract=2940611

Benjamin Hansen (Contact Author)

University of Oregon - Department of Economics ( email )

1285 University of ORegon
Eugene, OR 97403
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Tuan Nguyen

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

Glen Waddell

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States
541-346-1259 (Phone)
541-346-1243 (Fax)

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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