The Employers' Cost of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy

34 Pages Posted: 14 Apr 2007 Last revised: 20 Apr 2010

See all articles by Alan B. Krueger

Alan B. Krueger

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

John F. Burton, Jr.

Rutgers University - School of Management and Labor Relations

Date Written: July 1989

Abstract

This paper presents estimates of the average cost of the workers' compensation insurance program for a homogeneous group of employers by state. These estimates are of interest because they reflect the operation, direct nominal costs, and efficiency of workers' compensation. The paper estimates cost equations for a variety of alternative specifications. The main finding is that when cost equations are estimated by ordinary least squares there is a unit elasticity of costs with respect to benefits, but instrumental variable estimates of the effect of benefits yield a greater than unit elasticity. The results also indicate that the presence of a state insurance fund is associated with higher average costs to employers, all else equal. Finally, we explore the impact that the minimum standards recommended by the National Commission on State Workmen's Compensation Laws would have on workers' compensation costs.

Suggested Citation

Krueger, Alan B. and Burton, John F., The Employers' Cost of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy (July 1989). NBER Working Paper No. w3029. Available at SSRN: https://ssrn.com/abstract=979938

Alan B. Krueger (Contact Author)

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
609-258-4046 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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John F. Burton

Rutgers University - School of Management and Labor Relations ( email )

56 Primrose Circle
Princeton, NJ 08540
United States
732-274-0600 (Phone)
732-274-0678 (Fax)

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