The welfare implications of increasing disability insurance benefit generosity
AbstractThe focus on efficiency costs in the empirical literature on Disability Insurance (DI) provides a misleading view of the adequacy of payment levels. In order to evaluate whether workers are over- or under-insured through the social insurance program, we develop a framework that allows us to simulate the benefits as well as the costs associated with marginal changes in payment generosity from a representative cross-sectional sample of the population. Under the assumption that individuals are reasonably risk averse, our simulations suggest the typical worker would value increased benefits somewhat above the average costs of providing them. However, we find that benefit increases tend to lower average utility when we average across all individuals in our sample, particularly at high levels of risk aversion. This counterintuitive finding arises because some lower income DI-insured workers face replacement rates that are near or above one. For such individuals, a benefit increase would represent transfers from an even lower income state of the world in which they are not on DI to one in which they are, a transfer that would not be beneficial even if there were no behavioral distortions associated with the provision of DI benefits.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 88 (2004)
Issue (Month): 12 (December)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505578
Other versions of this item:
- John Bound & Julie Berry Cullen & Austin Nichols & Lucie Schmidt, 2002. "The Welfare Implications of Increasing Disability Insurance Benefit Generosity," NBER Working Papers 9155, National Bureau of Economic Research, Inc.
- John Bound & Julie Berry Cullen & Austin Nichols & Lucie Schmidt, 2002. "The Welfare Implications of Increasing Disability Insurance Benefit Generosity," Department of Economics Working Papers 2002-02, Department of Economics, Williams College.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kreider, Brent, 1999.
"Social Security Disability Insurance: Applications, Awards, and Lifetime Income Flows,"
Staff General Research Papers
5188, Iowa State University, Department of Economics.
- Kreider, Brent, 1999. "Social Security Disability Insurance: Applications, Awards, and Lifetime Income Flows," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 784-827, October.
- David H. Autor & Mark G. Duggan, 2003. "The Rise In The Disability Rolls And The Decline In Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 157-205, February.
- Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
- Jonathan Gruber, 2000.
"Disability Insurance Benefits and Labor Supply,"
Journal of Political Economy,
University of Chicago Press, vol. 108(6), pages 1162-1183, December.
- Sheshinski, E. & Diamond, P., 1992.
"Economic Aspects of Optimal Disability Benefits,"
92-5, Massachusetts Institute of Technology (MIT), Department of Economics.
- Patricia M. Anderson & Bruce D. Meyer, 1995.
"The Incidence of a Firm-Varying Payroll Tax: The Case of Unemployment Insurance,"
NBER Working Papers
5201, National Bureau of Economic Research, Inc.
- Patricia M. Anderson & Bruce D. Meyer, . "The Incidence of a Firm-Varying Payroll Tax: The Case of Unemployment Insurance," IPR working papers 95-23, Institute for Policy Resarch at Northwestern University.
- Richard V. Burkhauser & Robert H. Haveman & Barbara L. Wolfe, 1993.
"How people with disabilities fare when public policies change,"
Journal of Policy Analysis and Management,
John Wiley & Sons, Ltd., vol. 12(2), pages 251-269.
- R. V. Burkhauser & R. H. Haveman & B. L. Wolfe, . "How people with disabilities fare when public policies change," Institute for Research on Poverty Discussion Papers 974-92, University of Wisconsin Institute for Research on Poverty.
- John Bound & Timothy Waidmann, 2002. "Accounting for Recent Declines in Employment Rates among Working-Aged Men and Women with Disabilities," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 231-250.
- Edward J. Bird, 1996. "Repairing the safety net: Is the EITC the right patch?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 15(1), pages 1-31.
- Robert Haveman & Barbara Wolfe, 1990. "The Economic Well-Being of the Disabled: 1962-84," Journal of Human Resources, University of Wisconsin Press, vol. 25(1), pages 32-54.
- Diamond, P. A. & Mirrlees, J. A., 1978.
"A model of social insurance with variable retirement,"
Journal of Public Economics,
Elsevier, vol. 10(3), pages 295-336, December.
- P. A. Diamond & J. A. Mirrlees, 1977. "A Model of Social Insurance With Variable Retirement," Working papers 210, Massachusetts Institute of Technology (MIT), Department of Economics.
- Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
- Timothy Waidmann & John Bound & Michael Schoenbaum, 1995. "The Illusion of Failure: Trends in the Self-Reported Health of the U.S. Elderly," NBER Working Papers 5017, National Bureau of Economic Research, Inc.
- Currie, Janet & Madrian, Brigitte C., 1999.
"Health, health insurance and the labor market,"
Handbook of Labor Economics,
in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 50, pages 3309-3416
- Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
- Cullen, Julie Berry & Gruber, Jonathan, 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 546-72, July.
- Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
- Bound, John & Waidmann, Timothy, 1992. "Disability Transfers, Self-Reported Health, and the Labor Force Attachment of Older Men: Evidence from the Historical Record," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1393-419, November.
- John Bound & Timothy Waidmann, 2000. "Accounting for Recent Declines in Employment Rates among the Working-Aged Disabled," NBER Working Papers 7975, National Bureau of Economic Research, Inc.
- Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.