This paper presents estimates of the average cost of the workers’
compensation insurance program for a homogeneous group of employers by state.
These estimates are of interest because they reflect the operation, direct
costs, and efficiency of workers’ compensation. The paper estimates cost
equations for a variety of alternative specifications. The main finding is
that costs tend to rise equal proportionally with benefits -- doubling
benefits will double insurance costs. The results also indicate that state
provision of workers’ compensation insurance is associated with higher average
costs to employers, all else equal. Finally, we explore the impact that the
minimum standards recommended by the National Commission on State Workmen's
Compensation Laws would have on workers’ compensation costs.

This paper uses longitudinal CPS data on a large sample of workers to
estimate the determinants of participation in state workers’ compensation
programs in the United States. The principal finding is that higher workers’
compensation benefits are associated with greater participation in the
workers’ compensation program, after allowing for worker characteristics,
state dummy variables and other aspects of the workers’ compensation law.
Moreover, this result holds for both manufacturing and nonmanufacturing
workers. Workers’ compensation benefits, however, have an insignificant
effect on program participation for the sample of women. Overall, a 10%
increase in benefits is associated with a 7.1% increase in program
participation. In addition, the results show that the waiting period that is
required before benefit payments begin has a substantial negative effect on
participation in the workers’ compensation program. Finally, with the
exception of unemployment insurance, there is little evidence that workers are
comparatively more likely to participate in other social insurance programs
while they are collecting workers’ compensation benefits.