Fundamentally reforming the DI system: Evidence from Germany

Yaming Cao, Björn Fischer-Weckemann, Johannes Geyer and Nicolas Ziebarth ()

No 26-006, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: In 2001, Germany abolished public occupational disability insurance (ODI)-the second tier of its public DI system-for cohorts born after 1960. Using administrative data, we first document that, in the long run, overall DI inflows declined by roughly one-third. Second, using representative survey data, we document at best modest ODI insurance take-up responses in the private individual, risk-rated market, which lacks guaranteed issue. Third, an equilibrium model incorporating interactions between the public safety net, the first-tier public DI, and the private market reveals that coverage denials and weak insurance demand, driven by complementary social insurance, can explain the modest private ODI take-up response. Coverage gradients by income and health are thus substantial. Finally, counterfactual simulations highlight the limited scope of incremental reforms.

Keywords: occupational disability insurance; individual private DI; coverage denials; risk rating; private information; adverse selection; social safety net (search for similar items in EconPapers)
JEL-codes: D14 D82 H53 H55 I14 I18 J14 J26 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-eur, nep-hea and nep-lma
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https://www.econstor.eu/bitstream/10419/337485/1/1963112458.pdf (application/pdf)

Related works:
Working Paper: Fundamentally Reforming the DI System: Evidence from Germany (2026)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:337485

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