WORKERS COMPENSATION AND INJURY DURATION - EVIDENCE FROM A NATURAL EXPERIMENT

This paper examines the effect of workers' compensation on time out of work, It introduces a ''natural experiment'' approach of comparing in dividuals injured before and after increases in the maximum weekly ben efit amount. The increases examined in Kentucky and Michigan raised th e benefit amount for high-earnings individuals by approximately 50 per cent, while low-earnings individuals, who were unaffected by the benef it maximum, did nor experience a change in their incentives. Time out of work increased for those eligible for the higher benefits and remai ned unchanged for those whose benefits were constant. The estimated du ration elasticities are clustered around 0.3-0.4.