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Measuring the Value of Disability Insurance from Take-Up Decisions

Author

Listed:
  • Andreas Haller
  • Stefan Staubli

Abstract

The central trade-off for designing Disability Insurance (DI) is between providing insurance to those in need while maintaining incentives to work. This paper develops a novel revealed-preference approach to identify the insurance value of DI benefits. We show that comparing the DI take-up response to a change in benefits versus a change in wages identifies the insurance value. Implementing our framework in Canada, we estimate that increasing DI benefits by $1 creates an additional disincentive cost of $0.60 but creates an insurance value of $2.20. Thus, our approach suggests that DI benefits are not overly generous in the Canadian context.

Suggested Citation

  • Andreas Haller & Stefan Staubli, 2026. "Measuring the Value of Disability Insurance from Take-Up Decisions," CESifo Working Paper Series 12790, CESifo.
    • Handle: RePEc:ces:ceswps:_12790
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    File URL: https://www.ifo.de/DocDL/cesifo1_wp12790.pdf
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    Keywords

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    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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