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

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

Cahiers de recherche / Working Papers from Institut sur la retraite et l'épargne / Retirement and Savings Institute

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. Our analysis suggests that the welfare cost of rolling back the Austrian DI program is lower through tightening eligibility rules than through lowering benefits. Applying our framework to the US DI system suggests that both loosening eligibility rules, and increasing benefits, would be welfare increasing.

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
New Economics Papers: this item is included in nep-eur, nep-ias and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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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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