Volume 9, Number 3 (Summer) 1974
Russell, Louise B. 1974. "Safety Incentives in Workmen's Compensation Insurance." Journal of Human Resources 9(3):361-375.
The workmen's compensation insurance premiums of most employers are adjusted, by the use of an experience-rating formula, to reflect the firm's accident record. This paper presents, by firm size, the elasticities of the most commonly used formula with respect to accident frequency and severity. The analysis shows that financial incentives for safety are negligible for small firms, and thus it fails to support the recent National Commission's recommendation that experience rating be extended to still smaller firms. It is also shown that quite large increases in benefit levels would do virtually nothing to increase those incentives.
The author is Senior Economist, National Planning Association. Much of the work on which this paper is based was done while the author was on the staff of the National Commission on State Workmen's Compensation Laws. The views expressed in this paper are those of the author and are not necessarily shared by the National Commission or the National Planning Association. The author is grateful for the helpful comments of an anonymous referee.
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