The Demand for Insurance and Rationale for a Mandate: Evidence from Workers' Compensation Insurance

Marika Cabral, Can Cui and Michael Dworsky

American Economic Review, 2022, vol. 112, issue 5, 1621-68

Abstract: Workers' compensation insurance, which provides no-fault coverage for work-related injuries, is mandatory in nearly all states. We use administrative data from a unique market without a coverage mandate to estimate the demand for workers' compensation insurance, leveraging regulatory premium updates for identification. We find that a 1 percent increase in premiums leads to approximately a 0.3 percent decline in coverage. Drawing upon these estimates and data on costs, we examine potential justifications for government intervention to increase coverage. This analysis suggests that several forms of market failure—such as adverse selection, market power, and externalities—may not justify a mandate in this setting.

JEL-codes: G22 G52 J28 K13 K31 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (12)

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DOI: 10.1257/aer.20190261

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