 Privatizing public services and strategic behavior: The impact of incentives to reduce workers' compensation claim durationJournal of Public Economics, 2010, vol. 94, issue 9-10, 777-789 Abstract: During the 1990s, the state of Ohio contracted out Workers' Compensation (WC) case management, incorporating a large bonus payment intended to reward reduced claim duration. The bonus is essentially a decreasing function of average days away from work, excluding claims longer than 15 months. In response, duration is predicted to decrease for claims with moderate injuries and increase for some severe claims so that claimants will miss more than 15 months of work and be excluded from the calculation. I show that contractors increased duration for severe claims but find no evidence that contractors successfully reduced duration for moderate claims. However, contractors received large bonus payments. This is likely because the financial reward to merely excluding a small share of severe claims from the calculation of the bonus payment is large enough to enable TCMs to receive the full bonus. These contractor responses are inconsistent with state intentions, suggesting public entities should anticipate strategic behavior when crafting performance-based incentives. Keywords: Public economics Public policy Contracting out State and local governments Health; education; and welfare Job safety (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:94:y:2010:i:9-10:p:777-789 Access Statistics for this article Journal of Public Economics is currently edited by R. Boadway and J. Poterba More articles in Journal of Public Economics from Elsevier |
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