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Occupational hazards and social disability insurance

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  • Amanda M. Michaud
  • David Wiczer

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 2.6% relative to actuarially fair insurance, mostly due to risk sharing.

Suggested Citation

  • Amanda M. Michaud & David Wiczer, 2014. "Occupational hazards and social disability insurance," Working Papers 2014-24, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2014-024
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    References listed on IDEAS

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    1. Bastian Ravesteijn & Hans van Kippersluis & Eddy van Doorslaer, 2018. "The wear and tear on health: What is the role of occupation?," Health Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 69-86, February.
    2. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 1, pages 1-102, Elsevier.
    3. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    4. Mikhail Golosov & Aleh Tsyvinski, 2006. "Designing Optimal Disability Insurance: A Case for Asset Testing," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 257-279, April.
    5. David H. Autor & Mark G. Duggan, 2006. "The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 71-96, Summer.
    6. Morefield Brant & Ribar David C. & Ruhm Christopher J., 2012. "Occupational Status and Health Transitions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(3), pages 1-29, March.
    7. Kitao, Sagiri, 2014. "A life-cycle model of unemployment and disability insurance," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 1-18.
    8. Jason M. Fletcher & Jody L. Sindelar & Shintaro Yamaguchi, 2011. "Cumulative effects of job characteristics on health," Health Economics, John Wiley & Sons, Ltd., vol. 20(5), pages 553-570, May.
    9. AfDB AfDB, . "Annual Report 2012," Annual Report, African Development Bank, number 461.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Occupational Hazards and Social Disability Insurance
      by Christian Zimmermann in NEP-DGE blog on 2017-11-04 02:18:29

    Citations

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    Cited by:

    1. Naoki Aizawa & Soojin Kim & Serena Rhee, 2020. "Labor Market Screening and the Design of Social Insurance: An Equilibrium Analysis of the Labor Market for the Disabled," NBER Working Papers 27478, National Bureau of Economic Research, Inc.
    2. David Wiczer & Amanda Michaud, 2017. "The Disability Option: Labor Market Dynamics with Macroeconomic and Health Risks," 2017 Meeting Papers 1459, Society for Economic Dynamics.
    3. Hamish Low & Luigi Pistaferri, 2019. "Disability Insurance: Error Rates and Gender Differences," Economics Series Working Papers 889, University of Oxford, Department of Economics.
    4. Hamish Low & Luigi Pistaferri, 2020. "Disability Insurance: Theoretical Trade‐Offs and Empirical Evidence," Fiscal Studies, John Wiley & Sons, vol. 41(1), pages 129-164, March.
    5. Shah Rome Khan & Muhammad Imran Khan & Dr. Sardar Javaid Iqbal Khan, 2023. "An Investigation into the Statistical Significance of Labor Force Longevity in Brick Kilns and Marble Industry: A Case Study of Peshawar," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 9(2), pages 679-688.
    6. Fatih Guvenen & Burhan Kuruscu & Satoshi Tanaka & David Wiczer, 2020. "Multidimensional Skill Mismatch," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(1), pages 210-244, January.
    7. Feng, Zhigang & Zhao, Kai, 2018. "Employment-based health insurance and aggregate labor supply," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 156-174.
    8. 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.
    9. Satoshi Tanaka & David Wiczer & Burhanettin Kuruscu & Fatih Guvenen, 2015. "Occupational Switching and Self-Discovery in the Labor Market," 2015 Meeting Papers 1181, Society for Economic Dynamics.
    10. 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.

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    More about this item

    Keywords

    Disability Insurance; Occupational Choice; Optimal Policy;
    All these keywords.

    JEL classification:

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

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