The Demand for Insurance and Rationale for a Mandate: Evidence from Workers’ Compensation Insurance

Marika Cabral, Can Cui and Michael Dworsky

No 26103, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the demand for insurance and the potential rationale for coverage mandates in the context of workers’ compensation insurance. Workers’ compensation is a state-regulated insurance program that provides employers with liability protection and employees with defined income and medical benefits in the event of work-related injuries or illnesses. Nearly all states have mandated workers’ compensation insurance coverage; the sole exception is Texas. Using administrative data from the unique voluntary Texas workers’ compensation insurance system, we estimate the demand for workers’ compensation insurance leveraging idiosyncratic regulatory updates to relative premiums across industry-occupation classifications. The difference-in-differences estimates indicate that the demand for workers’ compensation coverage is price-sensitive, with a 1% increase in premiums leading to approximately a 0.3% decline in coverage. Drawing upon these estimates and additional data on costs, we analyze potential justifications for government intervention to increase coverage through subsidies or a mandate. This analysis suggests that some common market failure justifications for government intervention in insurance markets—adverse selection, market power, and externalities—may not be compelling justifications for a mandate in this setting.

JEL-codes: H0 I1 I13 I18 J38 (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-ias and nep-lma
Note: EH LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Marika Cabral & Can Cui & Michael Dworsky, 2022. "The Demand for Insurance and Rationale for a Mandate: Evidence from Workers’ Compensation Insurance," American Economic Review, vol 112(5), pages 1621-1668.

Downloads: (external link)
http://www.nber.org/papers/w26103.pdf (application/pdf)

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:nbr:nberwo:26103

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26103

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().