Do self-insurance and disability insurance prevent consumption loss on disability?
AbstractIn this paper we show the extent to which public insurance and self-insurance mitigate the cost of health shocks that limit the ability to work. We use consumption data from the UK to estimate the insurance provided by the government disability programme and account for the effectiveness of alternative self-insurance mechanisms. Individuals with a work-limiting health condition, but in receipt of disability insurance, have 7 percent lower consumption than those without such a condition. Self-insurance through savings and a working partner each provide some insurance benefit, improving outcomes from 2 percent to 4 percent. Reductions in the generosity of incapacity benefit after 1995 are associated with increases in the consumption loss associated with disability.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2009-31.
Date of creation: 2009
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-02 (All new papers)
- NEP-HEA-2009-08-02 (Health Economics)
- NEP-IAS-2009-08-02 (Insurance Economics)
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