Data/methods:. We use a new data set that combines a national random sample of matched employer-employee data with records from the Italian workers’ compensation agency. We compare the employment and wages of injured workers up to five years after the date of injury with outcomes for workers who did not experience any occupational injuries. We also compare workers who suffered a permanent disability with those whose disability was only temporary. We apply propensity score matching to the rich set of variables available in our data to construct a control group for the injured workers that is observably equivalent in terms of job characteristics, employer characteristics, and pre-injury career trajectories. We conduct analyses stratified on gender.
Results: Consistent with North American studies, we find that a severe occupational injury decreases the future economic well-being of workers. Five years after the injury, employees with severe temporary disabilities become less and less employable. Therefore, their losses continue far beyond the time that is officially compensated by the workers’ compensation system. Among permanently disabled workers, the severity of the injury is clearly related to future losses. However, for men losses seem to be driven by reduced employment while women experience larger reduction in wages over time. Workers with the most severe permanent disabilities, and who are compensated with annuities are the ones who fare the worst over time.
We view these findings as evidence for the important role that labour market institutions can play in mediating the pathway from injury to long-term disability and earnings losses. At the same time, the results suggest that very severe occupational injuries have detrimental consequences for individuals’ long-term economic well-being regardless of the different degrees of generosity of workers’ compensation policies and rules.