Incentive Effects of Workers' Compensation Insurance

44 Pages Posted: 14 Apr 2007 Last revised: 28 Dec 2011

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

Date Written: August 1989

Abstract

This paper uses Current Population Survey data on a large sample of workers to estimate the determinants of participation in state workers' compensation programs in the United States. The principal finding is Chat higher workers' compensation benefits are associated with greater participation in the workers' compensation program, after accounting for worker characteristics, state fixed effects, and other aspects of the workers' compensation law. Moreover, this result holds for both manufacturing and non-manufacturing workers. Workers' compensation benefits, however, have an insignificant effect on program participation for the sample of women. Overall, a 10% increase in benefits is associated with a 6.7% increase in program participation. In addition, the results show that the waiting period that is required before benefit payments begin has a substantial negative effect on participation in the workers' compensation program. Finally, the parameters of the cross-sectional model are used to simulate the aggregate workers' compensation incidence rate from 1969 to 1987. The growth in workers' compensation claims in the 1970s appears to correspond reasonably well co the growth in real benefits that occurred during this time period.

Suggested Citation

Krueger, Alan B., Incentive Effects of Workers' Compensation Insurance (August 1989). NBER Working Paper No. w3089. Available at SSRN: https://ssrn.com/abstract=980221

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)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
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Germany

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