“The Impact of Benefit Generosity on Workers’ Compensation Claims: Evidence and Implications”
Abstract: Optimal insurance benefit design requires understanding how coverage generosity impacts individual behavior and insured costs. This paper explores the impact of workers’ compensation wage replacement benefit generosity on individual behavior, program costs, and welfare. Workers’ compensation income benefit schedules are set by the state, where the weekly benefit amount paid for time out of work is a linear function of an injured worker’s prior average weekly wage, up to a maximum weekly benefit. Using unique comprehensive administrative data from Texas, we leverage a sharp increase in the maximum weekly benefit in a difference-in-differences research design by comparing outcomes for workers differentially exposed to the initial maximum benefit who were injured either just before or after the new maximum benefit was implemented. We find that increasing the generosity of wage replacement benefits does not impact the number of claims but has a large impact on claimant behavior, leading to longer income benefit durations and increased medical spending. Our estimates indicate that behavioral responses along these two margins—-income benefit duration and medical spending—-are equally important drivers of increased program costs, where collectively these behavioral responses imply an increase in insured costs that is nearly 1.5 times the mechanical increase in insured costs when benefits are expanded. Drawing on these estimates along with an estimate of the consumption drop experienced by injured workers, we calibrate a model to estimate the marginal welfare impact of increasing the generosity of workers’ compensation wage replacement benefits. Our estimates suggest that increasing benefit generosity does not improve welfare, with much of the projected welfare loss attributable to the previously unexplored impact of income benefit generosity on medical spending.

“Anti Insurance: The Perverse Targeting of Health Insurance”

“Heterogeneous choice sets and preferences”

“Marriage, Fertility, and Cultural Integration in Italy” (joint with Giulia Tura)