Workers' Compensation Liability Changes and the Distribution of Injury Claims

This paper presents a loss minimization model which predicts that employees will decrease their accident prevention effort and supply more claims as workers' compensation benefits increase. Likewise the model predicts that employers will increase their safety effort. These predictions are tested in the context of an empirical model which asserts that the decrease in employee effort will manifest itself as changes in the relative likelihood of certain types of injuries without necessarily changing the overall injury rate. The results demonstrate that significant changes in the proportion of certain types of injuries do occur when liability shares are changed.