Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits

Andreas Haller, Stefan Staubli and Josef Zweimüller ()

No 27602, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the welfare effects of disability insurance (DI) and derive social-optimality conditions for the two main DI policy parameters: (i) DI eligibility rules and (ii) DI benefits. Causal evidence from two DI reforms in Austria generate fiscal multipliers (total over mechanical cost reductions) of 2.0-2.5 for stricter DI eligibility rules and of 1.3-1.4 for lower DI benefits. Stricter DI eligibility rules generate lower income losses (earnings + transfers), particularly at the lower end of the income distribution. Our analysis suggests that the welfare cost of rolling back the Austrian DI program is lower through tightening eligibility rules than through lowering benefits. Applying our framework to the US DI system suggests that both loosening eligibility rules, and increasing benefits, would be welfare increasing.

JEL-codes: H53 H55 J14 J21 J65 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-ias and nep-lma
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Published as Andreas Haller & Stefan Staubli & Josef Zweimüller, 2024. "Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits?," Econometrica, Econometric Society, vol. 92(1), pages 79-110, January.

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Related works:
Journal Article: Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits? (2024)
Working Paper: Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits? (2020)
Working Paper: Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits? (2020)
Working Paper: Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits? (2020)
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