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

Arbeitspapier

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. Hence, to roll back the Austrian DI program, policy makers should implement tighter DI eligibility rules rather than lower DI benefits. An application of our framework to the DI system of the U.S. suggests that DI eligibility rules are too strict and DI benefits are too low.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 13539

Classification and Topics

• Classification: Wirtschaft ; National Government Expenditures and Welfare Programs ; Social Security and Public Pensions ; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination ; Labor Force and Employment, Size, and Structure ; Unemployment Insurance; Severance Pay; Plant Closings
• Subject: disability insurance ; screening ; benefits ; policy reform

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haller, Andreas ; Staubli, Stefan ; Zweimüller, Josef
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/223981
• Last update: 10.03.2025, 11:45 AM CET