Beyond Health: Non-Health Risk and the Value of Disability Insurance

ManasI Deshpande and Lee Lockwood

No 28852, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The public debate over disability insurance has centered on concerns about individuals without severe health conditions receiving benefits. We go beyond health risk alone to quantify the overall insurance value of U.S. disability programs, including value from insuring non-health risk. We find that disability recipients, especially those with less-severe health conditions, are much more likely to have experienced a wide variety of non-health shocks than non-recipients. Selection into disability receipt on the basis of non-health shocks is so strong among individuals with less-severe health conditions that by many measures less-severe recipients are worse off than more-severe recipients. As a result, under baseline assumptions, benefits to less-severe recipients have an annual surplus value (insurance benefit less efficiency cost) over cost-equivalent tax cuts of $7,700 per recipient, about three-fourths that of benefits to more-severe recipients ($9,900). Insurance against non-health risk accounts for about one-half of the value of U.S. disability programs.

JEL-codes: H5 I3 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-hea, nep-ias and nep-pbe
Note: AG EH PE
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Citations: View citations in EconPapers (3)

Published as Manasi Deshpande & Lee M. Lockwood, 2022. "Beyond Health: Nonhealth Risk and the Value of Disability Insurance," Econometrica, Econometric Society, vol. 90(4), pages 1781-1810, July.

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