Workers' Compensation for Occupational Disease: Prorating Liability Versus Last Employer Liability

Liability for occupational disease may be prorated among responsible employers or assigned to the last employer. In theory, it is shown that workers’ compensation with a prorating liability rule may achieve optimal compensation and deterrence over time if two-part liability can be imposed to employers; such optimum is not expected under workers’ compensation with the last employer liability rule. Empirical results indicate no significant difference between two workers’ compensation systems in their effects on the incidence of occupational disease. KEY WORDS: workers compensation, reserving.