Advanced Search
MyIDEAS: Login to save this paper or follow this series

Welfare And Output Enhancing Moral Hazard:Disability Benefits And Endogenous Occupational Choice

Contents:

Author Info

  • Paul Frijters
  • Michael A. Shields

    (School of Economics and Finance, Queensland University of Technology)

Abstract

One of the most prominent trends in OECD countries over the last 30 years has been the sharp increase in incidence of early retirement, and in particular the permanent take-up of disability benefits. In this paper we construct a theoretical model that shows how occupational choices, in terms of the associated health risks, made by the young can be affected by the expected provision of publicly funded disability benefits in later life. We find that because individuals are risk-averse, they take insufficient risks in the absence of insurance. Disability benefits lead to riskier aggregate behaviour, which in turn increases output and welfare at low levels of benefits, but will lead to excessive risk taking at high benefit levels to the detriment of output and welfare. We also show that the full impact of changes to the generosity of disability benefits in terms of increasing the take-up of such benefits is not immediate, but may take many years to realise because the previous career choices are largely irreversible. This time lag is consistent with the experiences of a number of countries over the last 30 years.

Download Info

If 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.
File URL: http://www.bus.qut.edu.au/paulfrijters/documents/Health%20theory%20paper.pdf
Download Restriction: no

Bibliographic Info

Paper provided by School of Economics and Finance, Queensland University of Technology in its series Paul Frijters Discussion Papers with number 2001-1.

as in new window
Length:
Date of creation: 15 Jun 2001
Date of revision:
Handle: RePEc:qut:pfrijt:2001-1

Contact details of provider:
Postal: GPO Box 2434, BRISBANE QLD 4001
Email:
Web page: http://www.bus.qut.edu.au/faculty/economics/
More information through EDIRC

Related research

Keywords: Occupational Choice; Health Risks; Disability Benefits; Moral Hazard; and Output;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
  2. Jon Harkness, 1993. "Labour Force Participation by Disabled Males in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 878-89, November.
  3. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  4. Gruber, Jonathan & Wise, David, 1998. "Social Security and Retirement: An International Comparison," American Economic Review, American Economic Association, vol. 88(2), pages 158-63, May.
  5. Boadway, Robin & Marceau, Nicolas & Sato, Motohiro, 1999. "Agency and the design of welfare systems," Journal of Public Economics, Elsevier, vol. 73(1), pages 1-30, July.
  6. 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.
  7. Jonathan Gruber & David A. Wise, 1999. "Introduction to "Social Security and Retirement around the World"," NBER Chapters, in: Social Security and Retirement around the World, pages 1-35 National Bureau of Economic Research, Inc.
  8. Brent Kreider & Regina T. Riphahn, 2000. "Explaining Applications to the U.S. Disability System: A Semiparametric Approach," Journal of Human Resources, University of Wisconsin Press, vol. 35(1), pages 82-115.
  9. Kerkhofs, Marcel & Lindeboom, Maarten & Theeuwes, Jules, 1999. "Retirement, financial incentives and health," Labour Economics, Elsevier, vol. 6(2), pages 203-227, June.
  10. Ed Westerhout, 2001. "Disability Risk, Disability Benefits, and Equilibrium Unemployment," International Tax and Public Finance, Springer, vol. 8(3), pages 219-244, May.
  11. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  12. Coile, Courtney & Diamond, Peter & Gruber, Jonathan & Jousten, Alain, 2002. "Delays in claiming social security benefits," Journal of Public Economics, Elsevier, vol. 84(3), pages 357-385, June.
  13. Sheshinski, E. & Diamond, P., 1992. "Economic Aspects of Optimal Disability Benefits," Working papers 92-5, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. 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.
  15. 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.
  16. Buddelmeyer, Hielke, 2001. "Re-employment Dynamics of Disabled Workers," IZA Discussion Papers 269, Institute for the Study of Labor (IZA).
  17. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, July.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:qut:pfrijt:2001-1. See general 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: (School of Economics) The email address of this maintainer does not seem to be valid anymore. Please ask School of Economics to update the entry or send us the correct address.

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.