THE EMPLOYERS COSTS OF WORKERS COMPENSATION INSURANCE - MAGNITUDES, DETERMINANTS, AND PUBLIC-POLICY

New estimates of the average cost of workers' compensation insurance for a homogeneous group of employers by state are presented. These data are used to estimate cost equations for a variety of alternative specifications. The main finding is that when cost equations are estimated by ordinary least squares there is a unit elasticity of costs with respect to benefits, but instrumental variable estimates of the effect of benefits yield a greater than unit elasticity. Finally, the presence of a state insurance fund is associated with higher average costs for employers, all else equal. -Authors