Working Paper: NBER ID: w26976
Authors: Marika Cabral; Marcus Dillender
Abstract: Leveraging unique administrative data and a sharp increase in benefit generosity in a difference-indifferences research design, we estimate the impact of workers’ compensation wage replacement benefits on individual behavior and program costs. We find that increased benefit generosity leads to longer income benefit durations and increased medical spending. Responses along these two margins are equally important drivers of increased program costs, collectively increasing program costs 1.4 times the mechanical increase in costs. Using these estimates and an estimate of the consumption drop among injured workers, our welfare calibrations suggest that a marginal increase in benefit generosity would not improve welfare.
Keywords: workers compensation; benefit generosity; claims; behavioral responses; welfare implications
JEL Codes: H00; I1; J01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in income benefit duration (H55) | increase in program costs (H59) |
| increase in medical spending (H51) | increase in program costs (H59) |
| increase in workers' compensation wage replacement benefits (J38) | increase in insurer costs (G52) |
| increase in benefit generosity (H55) | no welfare improvements (I38) |
| increase in workers' compensation wage replacement benefits (J38) | increase in income benefit duration (H55) |
| increase in workers' compensation wage replacement benefits (J38) | increase in medical spending (H51) |