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Do self-insurance and disability insurance prevent consumption loss on disability?

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  • Steffan G. Ball
  • Hamish W. Low

Abstract

In 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.

Suggested Citation

  • Steffan G. Ball & Hamish W. Low, 2009. "Do self-insurance and disability insurance prevent consumption loss on disability?," Finance and Economics Discussion Series 2009-31, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2009-31
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    Cited by:

    1. Bruce Meyer & Wallace K. C. Mok, 2016. "Disability, Earnings, Income and Consumption," NBER Chapters,in: Social Insurance Programs (Trans-Atlantic Public Economic Seminar - TAPES) National Bureau of Economic Research, Inc.
    2. Hamish Low & Luigi Pistaferri, 2015. "Disability Insurance and the Dynamics of the Incentive Insurance Trade-Off," American Economic Review, American Economic Association, pages 2986-3029.
    3. repec:eee:jhecon:v:53:y:2017:i:c:p:38-52 is not listed on IDEAS

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