Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits?

Stefan Staubli, Andreas Haller and Zweimüller, Josef
Authors registered in the RePEc Author Service: Josef Zweimüller ()

No 15121, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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. Hence, to roll back the Austrian DI program, policy makers should implement tighter DI eligibility rules rather than lower DI benefits. An application of our framework to the DI system of the U.S. suggests that DI eligibility rules are too strict and DI benefits are too low.

Keywords: Disability insurance; Screening; Benefits; Policy reform (search for similar items in EconPapers)
JEL-codes: H53 H55 J14 J21 J65 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-ias and nep-pbe
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Citations: View citations in EconPapers (7)

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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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