EconPapers    
Economics at your fingertips  
 

The Welfare Implications of Increasing Disability Insurance Benefit Generosity

John Bound, Julie Cullen (), Austin Nichols and Lucie Schmidt ()

No 9155, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The focus on efficiency costs in the empirical literature on Disability Insurance (DI) provides a misleading view of the adequacy of payment levels. In order to evaluate whether workers are over- or under-insured through the social insurance program, we develop a framework that allows us to simulate the benefits as well as the costs associated with marginal changes in payment generosity from a representative cross-sectional sample of the population. Under the assumption that individuals are reasonably risk averse, our simulations suggest the typical worker would value increased benefits somewhat above the average costs of providing them. However, we find that benefit increases tend to lower average utility when we average across all individuals in our sample, particularly at high levels of risk aversion. This counterintuitive finding arises because some lower income DI-insured workers face replacement rates that are near or above one. For such individuals, a benefit increase would represent transfers from an even lower income state of the world in which they are not on DI to one in which they are, a transfer that would not be beneficial even if there were no behavioral distortions associated with the provision of DI benefits.

JEL-codes: H21 H22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias, nep-lab and nep-mic
Date: 2002-09
Note: AG LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Published as Bound, John, Julie Berry Cullen, Austin Nichols and Lucie Schmidt. "The Welfare Implications Of Increasing Disability Insurance Benefit Generosity," Journal of Public Economics, 2004, v88(12,Dec), 2487-2514.

Downloads: (external link)
http://www.nber.org/papers/w9155.pdf (application/pdf)

Related works:
Journal Article: The welfare implications of increasing disability insurance benefit generosity (2004) Downloads
Working Paper: The Welfare Implications of Increasing Disability Insurance Benefit Generosity (2002) Downloads
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:nbr:nberwo:9155

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9155

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Series data maintained by ().

 
Page updated 2017-09-29
Handle: RePEc:nbr:nberwo:9155