 Optimal Partial and Full Disability Insurance with an Application to KoreaKyung-woo Lee
Korean Economic Review, 2019, vol. 35, 61-107 Abstract: In this paper, I investigate the optimal disability insurance (DI) when partial and full disability are privately observed over the life cycle. I demonstrate that in the social optimum, partially disabled agents are induced to supply labor despite substantial government transfers unless labor supply is relatively elastic and their productivity is significantly reduced. I then apply the framework to quantitatively evaluate Korea’s DI programs, which include partial and full disability benefits. In the calibrated model, I find that welfare gains from replacing Korea’s DI programs with the corresponding optimal system amount to a 1.17% increase in consumption. Such a reform significantly raises the utility of both types of disabled agents at relatively small utility costs of able agents. Equity gains from this redistribution account for 73.4% of the total welfare gains, whereas efficiency gains from the optimal allocation account for 26.6%. Keywords: Disability Insurance; Partial Disability; Full Disability; Korea (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:kea:keappr:ker-20190101-35-1-03 Access Statistics for this article Korean Economic Review is currently edited by Kyung Hwan Baik More articles in Korean Economic Review from Korean Economic Association Contact information at EDIRC. |
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