Foundations and Trends® in Microeconomics > Vol 5 > Issue 8

Moral Hazard and Benefits Consumption Capital in Program Overlap: The Case of Workers' Compensation

Richard J. Butler, Brigham Young University, USA, richard_butler@byu.edu Harold H. Gardner, HCMS Group, USA, hgardner@hcmsgroup.com
 
Suggested Citation
Richard J. Butler and Harold H. Gardner (2011), "Moral Hazard and Benefits Consumption Capital in Program Overlap: The Case of Workers' Compensation", Foundations and TrendsĀ® in Microeconomics: Vol. 5: No. 8, pp 477-528. http://dx.doi.org/10.1561/0700000037

Published: 15 Apr 2011
© 2011 R. J. Butler and H. H. Gardner
 
Subjects
Labor Economics
 
Keywords
Moral hazardWorkers compensationDisability insuranceBenefitsLabor EconomicsInsurancePublic economics
 

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In this article:
1 Introduction
2 Worker' Compensation/Sick Leave as Prototypes for Program Overlap
3 Evidence of Inter-program Moral Hazard
4 Benefits Consumption Capital: "Inter-temporal Moral Hazard"
5 Moral Hazard and the Concentration of Non-wage Benefits
6 Some Concluding Observations
References

Abstract

In this paper we review and extend the analysis of moral hazard response in two relatively unexamined empirical directions: (1) how insurance changes in one program affects employee participation in other programs at a point in time (inter-program moral hazard), and (2) how the consumption of program benefits now tends to affect employees behavior over time (benefits consumption capital). We develop a formal model of inter-program moral hazard based on workers' compensation with programs overlapping it (including sick leave, health insurance, and unemployment insurance), and review evidence concerning this overlap response. We also provide new evidence on benefits consumption capital concerning workers' compensation using data from one large private employer in the US.

DOI:10.1561/0700000037
ISBN: 978-1-60198-428-9
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Table of contents:
1. Introduction
2. Worker' Compensation/Sick Leave as Prototypes for Program Overlap
3. Evidence of Inter-program Moral Hazard
4. Benefits Consumption Capital: "Inter-temporal Moral Hazard"
5. Moral hazard and the Concentration of Non-wage Benefits
6. Some Concluding Observations
References

Moral Hazard and Benefits Consumption Capital in Program Overlap

Moral Hazard and Benefits Consumption Capital in Program Overlap reviews and extends the analysis of moral hazard response in two empirical directions: 1) how insurance changes in one program affects employee participation in other programs at a point in time (inter-program moral hazard), and 2) how the consumption of program benefits now tends to affect employees behavior over time (benefits consumption capital). The authors focus principally on workers compensation and programs that overlap with potential workers compensation coverage to keep institutional issues to a manageable level. This will not only include employer-provided health/health care insurance, short and long term disability insurance, and Federal benefits under the social security disability program, but also Federal benefits paid under unemployment insurance.

 
MIC-037