ECONOMIC-DETERMINANTS OF WORKERS COMPENSATION TRENDS

The upward trend in workers' compensation indemnity claims has been largely the result of two forces: changes in the program itself, particularly in the level of benefits and in the decline in the waiting period, and changes in the demography of the workforce, particularly the level of risky employment and the number of older workers. Consistent with previous research in workers' compensation, my research shows sizable increases in both the frequency and severity of insurance claims as the wage replacement rate increased and as the waiting period decreased. Comparisons with Occupational Safety and Health Administration data indicate that the increased benefit utilization comes from an increased propensity to report claims rather than a change in workers' or firms' risky behavior. This suggests that, even though current workplaces may be safer, the number of workers reporting an injury may increase as benefits are liberalized or as waiting periods continue to change.