Unresolved Conflict in Workers' Compensation: The Impact of Legal Representation on Workers' Compensation Benefits

We estimate the causal effect of attorney involvement on the indemnity benefits workers receive after their injuries. To address the fundamental challenge that claims and injuries may differ on unmeasured dimensions that affect both attorney involvement and benefits received, we propose and use two instruments. The first is the baseline local area attorney involvement rate derived from a subset of claims for fractures, lacerations, and contusions without permanent partial disability and/or lump-sum payments. The second instrument is a delay in the first indemnity payment. Our outcome is the total indemnity benefits that workers receive after their injuries, which captures payments to workers for time lost from work and other adverse effects of an injury. Our analysis of more than 950,000 claims with more than seven days of lost time indicates that attorney involvement substantially increases total indemnity benefits paid to workers.