Disability Risk, Disability Insurance and Life Cycle Behavior / Hamish Low, Luigi Pistaferri.

Format:

Book

Author/Creator:

Low, Hamish.

Contributor:

National Bureau of Economic Research.

Pistaferri, Luigi.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15962.

NBER working paper series no. w15962

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

This paper provides a life-cycle framework for weighing up the insurance value of disability benefits against the incentive cost. Within this framework, we estimate the life-cycle risks that individuals face in the US, as well as the parameters governing the disability insurance program, using indirect inference and longitudinal data on consumption, disability status, disability insurance receipt, and wages. We use our estimates to characterize the economic effects of disability programs and to consider how policy reforms would affect behaviour and standard measures of household welfare. Because of high levels of false rejections associated with the screening problem, average household welfare increases as the program becomes less strict, despite the worsening incentives that this implies. Incentives for false applications are reduced by reducing generosity and increasing reassessments and these policies also increase average household welfare, despite the worse insurance implied.

Notes:

Print version record

May 2010.