Accident risk compensation in late imperial Austria: Wage differentials and social insurance

We test for substitutability of wage differentials and accident insurance benefits in late imperial Austria. We establish that workers earned compensating wage differentials and that accident insurance benefits acted as substitutes for those market-based differentials. We estimate that an average expected value of insurance benefit reduced the compensating wage differential by about one-third. The shift from negligence liability to compulsory accident insurance thus induced both gains to workers in the form of income certainty, and losses in the form of smaller risk differentials and thus lower wages.