EconPapers    
Economics at your fingertips  
 

Worker's Compensation Rate Regulation: How Price Controls Increase Costs

Patricia Danzon and Scott E Harrington

Journal of Law and Economics, 2001, vol. 44, issue 1, 1-36

Abstract: In the 1980s, regulation constrained workers' compensation insurance premiums in the face of rapid growth in loss costs. We develop and test the hypothesis that rate suppression exacerbates loss growth, leading to higher losses and premiums. The empirical analysis using rating class data for eight states for the period 1985 91 confirms that rate suppression, measured by lagged residual-market share of payroll, increased loss growth. The cost-increasing effects are greater in the residual market than in the voluntary market, but premiums increased more rapidly in the voluntary market. The resulting pattern of cross subsidies between and within classes is consistent with a simple model of political influence, with subsidies to high risks and small firms at the expense of low risks and insurer equity. Copyright 2001 by the University of Chicago.

Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1086/320270 (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlawec:v:44:y:2001:i:1:p:1-36

Access Statistics for this article

More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2021-08-31
Handle: RePEc:ucp:jlawec:v:44:y:2001:i:1:p:1-36