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Occupational hazards and social disability insurance

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  • Michaud, Amanda
  • Wiczer, David

Abstract

Using retrospective data, we introduce evidence that occupational exposure significantly affects disability risk. Incorporating this into a general equilibrium model, social disability insurance (SDI) affects welfare through (i) the classic, risk-sharing channel and (ii) a new channel of occupational reallocation. Both channels can increase welfare, but at the optimal SDI they are at odds. Welfare gains from additional risk-sharing are reduced by overly incentivizing workers to choose risky occupations. In a calibration, optimal SDI increases welfare by 6.3% relative to actuarially fair insurance, mostly due to risk sharing.

Suggested Citation

  • Michaud, Amanda & Wiczer, David, 2018. "Occupational hazards and social disability insurance," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 77-92.
    • Handle: RePEc:eee:moneco:v:96:y:2018:i:c:p:77-92
    DOI: 10.1016/j.jmoneco.2018.04.002
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    1. repec:eee:jeborg:v:154:y:2018:i:c:p:156-174 is not listed on IDEAS

    More about this item

    Keywords

    Disability insurance; Occupational choice; Optimal policy;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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