When to Start a Fight and When to Fight Back: Liability Disputes in the Workers' Compensation System

David Card and Brian McCall

No 11918, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Despite the adoption of no-fault Workers' Compensation legislation in most states, there is substantial litigation over the issue of employer liability for injury claims. We develop a sequential asymmetric information model of liability disputes and estimate the model using data on injury claims from the state of Minnesota. The key insight of our model is that when workers differ in their costs of pursuing a injury claim, employers have an incentive to deny liability and force those with higher costs to abandon their claim. Likewise, workers who expect a bigger return from pursuing their claim are more likely to fight back when liability is denied. Estimates of the structural model confirm that the decision rules of both parties depend on the expected costs and benefits of continuing the dispute. The model provides a parsimonious but relatively successful explanation for the distribution of liability disputes across different workers and types of injuries.

JEL-codes: J28 K41 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-bec
Note: LS
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Published as David Card & Brian P. McCall, 2009. "When to Start a Fight and When to Fight Back: Liability Disputes in the Workers' Compensation System," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 149-178, 04.

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