Measuring the Value of Disability Insurance from Take-Up Decisions

Andreas Haller and Stefan Staubli

No 21704, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The central trade-off for designing Disability Insurance (DI) is between providing insurance to those in need while maintaining incentives to work. This paper develops a novel revealed-preference approach to identify the insurance value of DI benefits. We show that comparing the DI take-up response to a change in benefits versus a change in wages identifies the insurance value. Implementing our framework in Canada, we estimate that increasing DI benefits by $1 creates an additional disincentive cost of $0.60 but creates an insurance value of $2.20. Thus, our approach suggests that DI benefits are not overly generous in the Canadian context.

Keywords: Disability; insurance (search for similar items in EconPapers)
JEL-codes: H55 (search for similar items in EconPapers)
Date: 2026-07
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