Disability Insurance and the Dynamics of the Incentive Insurance Trade-Off

Hamish Low and Luigi Pistaferri

American Economic Review, 2015, vol. 105, issue 10, 2986-3029

Abstract: We provide a life-cycle framework for comparing insurance and disincentive effects of disability benefits. The risks that individuals face and the parameters of the Disability Insurance (DI) program are estimated from consumption, health, disability insurance, and wage data. We characterize the effects of disability insurance and study how policy reforms impact behavior and welfare. DI features high rejection rates of disabled applicants and some acceptance of healthy applicants. Despite worse incentives, welfare increases as programs become less strict or generosity increases. Disability insurance interacts with welfare programs: making unconditional means-tested programs more generous improves disability insurance targeting and increases welfare. (JEL D14, J24, J65)

JEL-codes: D14 J24 J65 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20110108
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (95)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.20110108 (application/pdf)
http://www.aeaweb.org/aer/app/10510/20110108_app.pdf (application/pdf)
http://www.aeaweb.org/aer/data/10510/20110108_data.zip (application/zip)
http://www.aeaweb.org/aer/ds/10510/20110108_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Disability Insurance and the Dynamics of the Incentive-Insurance Tradeoff (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:105:y:2015:i:10:p:2986-3029

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().