The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensations Insurance


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.

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In David Bradford (ed.), Tax Policy and the Economy, Vol 5, (Cambridge, MA: The MIT Press, 1991)
Working Papers