Have changing liability rules compensated workers twice for occupational hazards? Earnings premiums and cancer risks

During the last couple of decades, courts have intervened in employment rel ationships by allowing employees to circumvent the workers' compensation li ability restrictions. Recent papers point to firms' divesting themselves of operations whose employees handled dangerous substances as a way of protec ting themselves from these new liabilities. These actions supposedly preven t their workers from being justly compensated. We show that the central leg al premise behind this argument is wrong. Firms cannot expose workers to ha zards and then eliminate this liability by divesting or shutting down the h azardous operation. This paper also shows that workers were already being w ell compensated for carcinogenic exposures even before courts started allow ing workers to collect large damages for occupational illnesses. Institutin g the new liability rules also coincided with a large drop in earnings prem iums. The large premiums imply that workers who received court awards were essentially compensated twice for their misfortune.