The Health and Welfare Effects of Increases in Workers’ Compensation Benefits

This paper estimates the causal impacts of workers’ compensation income benefits on workers’ health and welfare outcomes. Using claims data from 2004 to 2016, I explore the variation in benefits due to a reform of New York workers’ compensation that increased the maximum weekly benefits. I find that a $77 increase in the weekly benefits led to an additional 3.4 days off work. Medical utilization did not increase. Each extra day off work decreased the reinjury likelihood by 2.9%. The current benefit level in New York is close to optimal in balancing payer cost and worker health outcomes.