Asymmetric Effects on Fatality Rates of Changes in Workers’ Compensation Laws
Forthcoming, American Law and Economics Review
58 Pages Posted: 27 Aug 2018 Last revised: 25 May 2019
Date Written: July 30, 2018
With irreversible capital investments, changes in workers’ compensation laws should affect employer incentives asymmetrically: increases in workers’ compensation generosity should cause employers to invest more in safety, but comparable decreases might not cause them to disinvest in existing precautionary programs or equipment. Although maximum weekly benefits caps have been fairly stable, state laws have expanded or restricted workers’ compensation on multiple other dimensions. State laws may impose new requirements regarding burdens of proof, access to medical care, and the duration of benefits. This article estimates the effect of changes in these more comprehensive measures of workers’ compensation laws on workplace safety. Using confidential, restricted data from the Census of Fatal Occupational Injuries (CFOI), the article finds that increases in workers’ compensation generosity lead to a significant decrease in fatality rates, while decreases in workers’ compensation generosity do not significantly increase fatality rates.
Keywords: workers’ compensation, fatality rate, safety, incentives
JEL Classification: I18, J28, J81, J83, K32
Suggested Citation: Suggested Citation