Benefit Generosity and Injury Duration: Quasi-Experimental Evidence from Regression Kinks

In this paper, we investigate the effect of increased benefits on claim duration and claim costs in temporary disability claims of workers’ compensation. While previous studies have focused on natural experiments created by one-time large changes in minimum or maximum weekly benefits, we focus on the kink in benefit generosity inherent in all workers’ compensation systems in the United States. Utilizing administrative data on the universe of injured workers in Oregon and California, we find evidence that more generous benefits leads to longer injuries, but with implied elasticities that are smaller than the average elasticity from previous difference-in-difference studies. Our preferred estimates suggest that increasing benefit generosity by 10 percent leads to a 2 to 4 percent increase in injury duration in Oregon and 8 to 10 percent increase in California. We also derive similar implied duration-benefit elasticities when studying changes in claim costs at the kink.