The Influence of Workers' Compensation on Safety Incentives

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Abstract
This study examines the impact of workers' compensation benefits on the allocation of resources to injury prevention, using unpublished data from OSHA on injury rates in manufacturing industries within 36 states. The analysis shows that higher compensation benefits are associated with lower severity rates of injury, suggesting that higher benefits induce employers to spend more on the prevention of serious injuries. On the other hand, higher benefits are also associated with higher frequency rates of injury, suggesting that higher benefits induce employees to take less care in preventing less serious injuries. The author suggests ways of resolving this dilemma and stresses that his findings show that decisions about the structure of workers' compensation laws should not be based solely on income security considerations, as they often are.

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