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Occupational hazards and social disability insurance

Amanda Michaud and David Wiczer ()

No 2014-24, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Using retrospective data, we introduce evidence that occupational exposure significantly affects disability risk. Incorporating this into a general equilibrium model, social disability insurance (SDI) affects welfare through (i) the classic, risk-sharing channel and (ii) a new channel of occupational reallocation. Both channels can increase welfare, but at the optimal SDI they are at odds. Welfare gains from additional risk-sharing are reduced by overly incentivizing workers to choose risky occupations. In a calibration, optimal SDI increases welfare by 2.6% relative to actuarially fair insurance, mostly due to risk sharing.

Keywords: Optimal Policy; Occupational Choice; Disability Insurance (search for similar items in EconPapers)
JEL-codes: E62 I13 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2014-08-26, Revised 2016-10-03
New Economics Papers: this item is included in nep-ger, nep-hea, nep-ias and nep-mac
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Journal Article: Occupational hazards and social disability insurance (2018) Downloads
Working Paper: Occupational Hazards and Social Disability Insurance (2017) Downloads
Working Paper: Occupational Hazards and Social Disability Insurance (2017) Downloads
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