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.

Workers’ compensation insurance provides cash payments and medical.
benefits to workers who incur a work-related injury or illness. Many
features of the workers’ compensation program parallel features of proposed
mandated employer-paid health insurance plans. This paper empirically
examines the incidence of the workers’ compensation program to infer the
likely consequences of mandated health insurance proposals. In certain ,
industries, such as trucking and carpentry, workers’ compensation insurance
costs are quite large, and vary tremendously within states over time, and
across states at a moment in time. This variation is used to identify the
incidence of the program. Empirical analysis of two data sets suggest that
changes in employers’ costs of workers’ compensation insurance are largely
shifted to employees in the form of lower wages. In addition, higher
insurance costs are found to have a negative but statistically
insignificant effect on employment. The implied elasticity of labor demand
from our results is about -.50.