Health Effects of Containing Moral Hazard: Evidence from Disability Insurance Reform

Pilar Garcia-Gomez and Anne Gielen

No 8386, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We exploit an age discontinuity in a Dutch disability insurance (DI) reform to identify the health impact of stricter eligibility criteria and reduced generosity. Our results show substantial adverse effects on life expectancy for women subject to the more stringent criteria. A €1,000 reduction in annual benefits leads to a 2.4 percentage points higher probability of death more than 10 years after the reform. This negative health effect is restricted to women with low pre-disability earnings. We find that the mortality rate of men subject to the stricter rules is reduced by 0.7 percentage points. We hypothesize that the gender difference in health outcomes is due to the reform tightening eligibility particularly with respect to mental health conditions, which are more prevalent among female DI claimants. The evidence for the existence of substantial health effects implies that policy makers considering a DI reform should carefully balance the welfare gains from reduced moral hazard against losses not only from less coverage of income risks but also from deteriorated health.

Keywords: disability insurance; moral hazard; health; mortality; regression discontinuity (search for similar items in EconPapers)
JEL-codes: H53 I14 I38 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014-08
New Economics Papers: this item is included in nep-eur, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Health Economics, 2018, 27 (3), 606-621.

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