Does Workers' Compensation Encourage Hard to Diagnose Injuries?

Abstract

Worker-generated claims reporting moral hazard is said to occur when, in order to collect workers' compensation benefits, workers report on-the-job injuries that never occurred or that occurred off-the-job. Using newly available injury micro data from the Bureau of Labor Statistics, this paper assesses the hypothesis that claims reporting moral hazard is more likely to occur for hard to diagnose injuries, such as back sprains and carpal tunnel syndrome, than for easy to diagnose cuts and fractures. Multinomial logits are estimated to control for a wide variety of worker, job, and establishment characteristics that are correlated with the distribution of injuries. When the only workers' compensation variable included in the analysis is the wage replacement rate, general support for the hypothesis is found. However, results are less strong, though not contradictory, when controls for the waiting period and for who get to choose the doctor are introduced into the analysis.

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