Privatizing public services and strategic behavior: The impact of incentives to reduce workers' compensation claim duration

A-Tier
Journal: Journal of Public Economics
Year: 2010
Volume: 94
Issue: 9-10
Pages: 777-789

Score contribution per author:

4.022 = (α=2.01 / 1 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

During the 1990s, the state of Ohio contracted out Workers' Compensation (WC) case management, incorporating a large bonus payment intended to reward reduced claim duration. The bonus is essentially a decreasing function of average days away from work, excluding claims longer than 15 months. In response, duration is predicted to decrease for claims with moderate injuries and increase for some severe claims so that claimants will miss more than 15 months of work and be excluded from the calculation. I show that contractors increased duration for severe claims but find no evidence that contractors successfully reduced duration for moderate claims. However, contractors received large bonus payments. This is likely because the financial reward to merely excluding a small share of severe claims from the calculation of the bonus payment is large enough to enable TCMs to receive the full bonus. These contractor responses are inconsistent with state intentions, suggesting public entities should anticipate strategic behavior when crafting performance-based incentives.

Technical Details

RePEc Handle
repec:eee:pubeco:v:94:y:2010:i:9-10:p:777-789
Journal Field
Public
Author Count
1
Added to Database
2026-01-26