The Closure Effect: Evidence from Workers Compensation Litigation

Henry Hyatt

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Consideration of the "best interests" of Workers Compensation (WC) claimants often involves the assumption that those who receive benefits in a "lump-sum" behave "too myopically" with respect to labor supply. However, many attorneys argue that lump-sum settlements induce a beneficial "sense of closure." In this paper, I provide an empirical context for these ideas using a unique set of linked administrative databases owned by the State of California. Upon receipt of a court-approved lump-sum settlement, WC claimants immediately increase labor supply. No such change is found for claimants who receive a court-approved settlement in which the insurer provides benefits over time, suggesting that the method of litigation settlement is a determinant of labor supply.

JEL-codes: H53 J32 K41 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2010-01
New Economics Papers: this item is included in nep-lab and nep-law
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https://www2.census.gov/ces/wp/2010/CES-WP-10-01.pdf First version, 2010 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:10-01

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