Document Type

Article

Publication Title

The American Economic Review

Publication Date

10-1995

Page Number

322

Keywords

workers compensation, time out of work, benefits, maximum weekly benefit, incentives

Disciplines

Law | Workers' Compensation Law

Abstract

This paper examines the effect of workers' compensation on time out of work. It introduces a "natural experiment" approach of comparing individuals injured before and after increases in the maximum weekly benefit amount. The increases examined in Kentucky and Michigan raised the benefit amount for high-earnings individuals by approximately 50 percent, while low-earnings individuals, who were unaffected by the benefit maximum, did not experience a change in their incentives. Time out of work increased for those eligible for the higher benefits and remained unchanged for those whose benefits were constant. The estimated duration elasticities are clustered around 0.3-0.4.

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