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A life-cycle model of unemployment and disability insurance

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  • Kitao, Sagiri

Abstract

A general equilibrium life-cycle model is developed, in which individuals choose a sequence of saving and labor supply faced with search frictions and uncertainty in longevity, health status and medical expenditures. Unemployed individuals decide whether to apply for disability insurance (DI) benefits if eligible. We investigate the effects of cash transfer and in-kind Medicare component of the DI system on the life-cycle employment. Without Medicare benefits, DI coverage could fall significantly. We also study how DI interacts with reforms of Social Security and Medicare and find that DI enrollment amplifies the effects of reforms.

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  • Kitao, Sagiri, 2014. "A life-cycle model of unemployment and disability insurance," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 1-18.
    • Handle: RePEc:eee:moneco:v:68:y:2014:i:c:p:1-18
    DOI: 10.1016/j.jmoneco.2014.07.008
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    Cited by:

    1. Jacobs, Lindsay, 2023. "Occupations, retirement, and the value of disability insurance," Journal of Public Economics, Elsevier, vol. 225(C).
    2. John Bailey Jones & Yue Li, 2023. "Social Security Reform with Heterogeneous Mortality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 320-344, April.
    3. Michael Keane & Elena Capatina & Shiko Maruyama, 2019. "Health Shocks and the Evolution of Earnings over the Life-Cycle," Discussion Papers 2018-14a, School of Economics, The University of New South Wales.
    4. Michaud, Amanda & Nelson, Jaeger & Wiczer, David, 2018. "Vocational considerations and trends in Social Security Disability," The Journal of the Economics of Ageing, Elsevier, vol. 11(C), pages 41-51.
    5. Hamish Low & Luigi Pistaferri, 2015. "Disability Insurance and the Dynamics of the Incentive Insurance Trade-Off," American Economic Review, American Economic Association, vol. 105(10), pages 2986-3029, October.
    6. Yu, Zhixiu, 2024. "Why are older men working more? The role of social security," Journal of Public Economics, Elsevier, vol. 231(C).
    7. David Wiczer & Amanda Michaud, 2017. "The Disability Option: Labor Market Dynamics with Macroeconomic and Health Risks," 2017 Meeting Papers 1459, Society for Economic Dynamics.
    8. Michaud, Amanda & Wiczer, David, 2018. "Occupational hazards and social disability insurance," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 77-92.
    9. Atsuko Tanaka & Hsuan-Chih (Luke) Lin & Ha Nguyen, "undated". "Removing Disability Insurance Coverage: The Effects on Work Incentive and Occupation Choice," Working Papers 2016-37, Department of Economics, University of Calgary, revised 10 Jul 2016.
    10. Nguyen Phuc Canh & Udomsak Wongchoti & Su Dinh Thanh, 2021. "Does economic policy uncertainty matter for insurance development? Evidence from 16 OECD countries," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(4), pages 614-648, October.
    11. Arie Arizandi Kurnianto & Gergely Fehér & Kevin Efrain Tololiu & Edza Aria Wikurendra & Zsolt Nemeskéri & István Ágoston, 2023. "Analysis of the Return to Work Program for Disabled Workers during the Pandemic COVID-19 Using the Quality of Life and Work Ability Index: Cross-Sectional Study," IJERPH, MDPI, vol. 20(4), pages 1-13, February.
    12. Roozbei Hosseini & Karen Kopecky & Kai Zhao, 2022. "The Evolution of Health over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 45, pages 237-263, July.
    13. Kyung-woo Lee, 2019. "Optimal Partial and Full Disability Insurance with an Application to Korea," Korean Economic Review, Korean Economic Association, vol. 35, pages 61-107.
    14. Jones, John Bailey & Li, Yue, 2018. "The effects of collecting income taxes on Social Security benefits," Journal of Public Economics, Elsevier, vol. 159(C), pages 128-145.
    15. Kim, Soojin & Rhee, Serena, 2018. "Measuring the effects of employment protection policies: Theory and evidence from the Americans with Disabilities Act," Labour Economics, Elsevier, vol. 54(C), pages 116-134.
    16. Naoki Aizawa & Soojin Kim & Serena Rhee, 2025. "Labour Market Screening and the Design of Social Insurance: An Equilibrium Analysis of the Labour Market for the Disabled," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 92(1), pages 1-39.
    17. Soojin Kim & Serena Rhee, 2022. "Understanding the Aggregate Effects of Disability Insurance," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 46, pages 328-364, October.
    18. Fatih Karahan & Yusuf Mercan, 2019. "UI and DI: Macroeconomic Implications of Program Substitution," 2019 Meeting Papers 1076, Society for Economic Dynamics.
    19. Taiyo Fukai & Hidehiko Ichimura & Sagiri Kitao & Minamo Mikoshiba, 2025. "Medical expenditures over the life-cycle: persistent risks and insurance," The Japanese Economic Review, Springer, vol. 76(2), pages 285-336, April.
    20. Shinnosuke KIKUCHI & Sagiri KITAO, 2020. "Welfare Effects of Polarization: Occupational Mobility over the Life-cycle," Discussion papers 20043, Research Institute of Economy, Trade and Industry (RIETI).
    21. Jack Britton & Eric French, 2020. "Health and Employment amongst Older Workers," Fiscal Studies, John Wiley & Sons, vol. 41(1), pages 221-250, March.
    22. Yue Li, 2018. "Economic Analysis Of Social Security Survivors Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(4), pages 2043-2073, November.
    23. Kim, Jiwoon, 2018. "The Effect of Enhancing Unemployment Benefits in Korea: Wage Replacement Rate vs. Maximum Benefit Duration," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 40(3), pages 1-44.
    24. Li, Yue, 2018. "Paradoxical effects of increasing the normal retirement age: A prospective evaluation," European Economic Review, Elsevier, vol. 101(C), pages 512-527.
    25. Gill, Balbinder Singh, 2023. "Health uninsurance premium and mortgage interest rates," International Review of Financial Analysis, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    Disability insurance; Labor force participation; Life-cycle; Medicare; Unemployment insurance; Social security; Medicare;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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