Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits / Andreas Haller, Stefan Staubli, Josef Zweimüller.

Format:

Book

Author/Creator:

Haller, Andreas.

Contributor:

National Bureau of Economic Research.

Staubli, Stefan.

Zweimüller, Josef.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27602.

NBER working paper series no. w27602

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

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.

Notes:

Print version record

July 2020.