Incentive Effects of Workers' Compensation Insurance
Alan B. Krueger
This paper uses Currenc Populacion Survey daca on a large sample of
workers to escimace the decerminancs of parcicipacion in scace workers'
compensacion programs in che United Staces. The principal finding is Chat
higher workers' compensation benefits are associaced with greater
parcicipacion in the workers' compensation program, after accounting for
worker characceriscics, state fixed effects, and other aspects of the workers'
compensation law. Moreover, this result holds for both manufacturing and
nonmanufacturing workers. Workers' compensacion benefits, however, have an
insignificanc effecc on program parcicipation for the sample of women.
Overall, a 10% increase in benefits is associaced with a 6.7% increase in
program participacion. In addicion, the results show that the waiting period
that is required before benefit paymencs begin has a substantial negative
effect on parcicipacion in the workers' compensation program. Finally, the
parameters of the cross-seccional 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.
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