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

Marika Cabral and Marcus Dillender

American Economic Journal: Applied Economics, 2024, vol. 16, issue 3, 436-81

Abstract: Leveraging unique administrative data and a sharp increase in benefit generosity in a difference-in-differences 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.

JEL-codes: D91 I11 J28 J31 (search for similar items in EconPapers)
Date: 2024
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Working Paper: The Impact of Benefit Generosity on Workers’ Compensation Claims: Evidence and Implications (2020)
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DOI: 10.1257/app.20220032

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