REVISITING INCENTIVE EFFECTS IN WORKERS' COMPENSATION: DO HIGHER BENEFITS REALLY INDUCE MORE CLAIMS?

An important question to ask regarding social insurance programs such as workers' compensation (WC) is to what extent do higher benefits lead to more claims? The authors of this study revisit incentive effects of WC, using 25 years of data (1977–2004) from the March Current Population Survey (C...

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Bibliographic Details
Published in:Industrial & labor relations review 2012-04, Vol.65 (2), p.286-315
Main Authors: BRONCHETTI, ERIN TODD, MCINERNEY, MELISSA
Format: Article
Language:English
Subjects:
Cash
Child welfare
Child Welfare Services
Earnings
Economic benefits
Economists
Employment
Labor Supply
Labour relations
Labour supply
Physical trauma
Social insurance
Social Programs
Tax benefits
Variable coefficients
Wages
Workers
Workers compensation insurance
Workplaces
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Summary:An important question to ask regarding social insurance programs such as workers' compensation (WC) is to what extent do higher benefits lead to more claims? The authors of this study revisit incentive effects of WC, using 25 years of data (1977–2004) from the March Current Population Survey (CPS) to estimate the relationship between WC cash benefit levels and the frequency of WC receipt. Providing new evidence on the subject, they demonstrate that conclusions regarding workers' incentives to claim benefits differ dramatically depending upon how one controls for the confounding influence of an individual's past earnings. The authors' expanded empirical specifications, which include flexible earnings controls, yield benefit-participation elasticities smaller than 0.1. Their findings suggest that WC claims are not particularly responsive to changes in benefit levels and that labor supply disincentives may warrant less concern than economists or policymakers have typically exhibited. The authors also find that WC receipt was less responsive to benefit variation after 1990 than in previous years.
ISSN:0019-7939
2162-271X
DOI:10.1177/001979391206500205