Lost injury days: Moral hazard differences between tort and workers' compensation

Texas is one of only three states where employers can opt out of workers' compensation, and the only state where a substantial number of employers choose to do so (44 percent). This article compares the lost injury day patterns of firms opting out of workers' compensation with those choosing to maintain a workers' compensation program. Support is found for the hypothesis that differences in reported lost work days partially reflect differences in moral hazard reporting incentives: in the opt-out sector, there are slightly higher injury rates, shorter lost work day durations, and fewer sprains and strains reported than in the workers' compensation sector.