Abstract
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.
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