Compensation for industrial accidents and incentives for prevention: a theoretical and empirical perspective

This paper examines the compensation systems for industrial accidents in Belgium, Germany and Great Britain, thereby taking into account some recent empirical data on industrial accident rates and (although hardly available) amounts of compensation paid out to employee victims. The key question of this paper, derived from past research in law and economics, is whether these particular compensation systems include elements that may contribute to the prevention of industrial accidents. While the three countries examined here all have at least some incentive-based elements, notably in the way those systems are financed, there appears to be room for improvement both in Belgium and Great Britain. The German case study leads to the proposition that giving an organisation the responsibility for both compensation and prevention may have a beneficial effect on the accident rate.