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The Impact of Benefit Generosity on Workers’ Compensation Claims: Evidence and Implications

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  • Marika Cabral
  • Marcus Dillender
Abstract
Leveraging unique administrative data and a sharp increase in benefit generosity in a difference-indifferences research design, we estimate the impact of workers’ compensation wage replacement benefits on individual behavior and program costs. We find that increased benefit generosity leads to longer income benefit durations and increased medical spending. Responses along these two margins are equally important drivers of increased program costs, collectively increasing program costs 1.4 times the mechanical increase in costs. Using these estimates and an estimate of the consumption drop among injured workers, our welfare calibrations suggest that a marginal increase in benefit generosity would not improve welfare.

Suggested Citation

  • Marika Cabral & Marcus Dillender, 2020. "The Impact of Benefit Generosity on Workers’ Compensation Claims: Evidence and Implications," NBER Working Papers 26976, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26976
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    References listed on IDEAS

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    9. Andrew C. Johnston & Alexandre Mas, 2018. "Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2480-2522.
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    15. David Autor & Mark Duggan & Jonathan Gruber, 2014. "Moral Hazard and Claims Deterrence in Private Disability Insurance," American Economic Journal: Applied Economics, American Economic Association, vol. 6(4), pages 110-141, October.
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    17. Marika Cabral & Can Cui & Michael Dworsky, 2019. "The Demand for Insurance and Rationale for a Mandate: Evidence from Workers’ Compensation Insurance," NBER Working Papers 26103, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Koning, Pierre & van Lent, Max, 2022. "Workers' Moral Hazard and Insurer Effort in Disability Insurance," IZA Discussion Papers 15164, Institute of Labor Economics (IZA).
    2. Rahi Abouk & Keshar M. Ghimire & Johanna Catherine Maclean & David Powell, 2023. "Pain Management and Work Capacity: Evidence From Workers’ Compensation and Marijuana Legalization," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(3), pages 737-770, June.
    3. Broten, Nicholas & Dworsky, Michael & Powell, David, 2022. "Do temporary workers experience additional employment and earnings risk after workplace injuries?," Journal of Public Economics, Elsevier, vol. 209(C).
    4. Corey J.M. Williams & Kole Reddig & Adam Nowak, "undated". "Collectible Pricing and Collector Utility: The Role of Production Commitments," Working Papers 24-03, Department of Economics, West Virginia University.
    5. Donou-Adonsou, Ficawoyi, 2022. "The effects of health conditions on financial sector development," Economic Modelling, Elsevier, vol. 114(C).
    6. Xiuming Dong & Johanna Catherine Maclean & David Powell, 2024. "Social Insurance Spillovers: Evidence From Paid Sick Leave Mandates and Workers' Compensation," NBER Working Papers 32751, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • I1 - Health, Education, and Welfare - - Health
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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