IDEAS home Printed from https://ideas.repec.org/p/tin/wpaper/20140102.html
   My bibliography  Save this paper

Mortality Effects of Containing Moral Hazard: Evidence from Disability Insurance Reform

Author

Listed:
  • Pilar Garcia-Gomez
  • Anne C. Gielen

    (Erasmus University Rotterdam, the Netherlands)

Abstract

We exploit an age discontinuity in a Dutch disability insurance (DI) reform to identify the health impact of stricter eligibility criteria and reduced generosity. Our results show substantial adverse effects on life expectancy for women subject to the more stringent criteria. A €1,000 reduction in annual benefits leads to a 2.4 percentage points higher probability of death more than 10 years after the reform. This negative health effect is restricted to women with low pre-disability earnings. We find that the mortality rate of men subject to the stricter rules is reduced by 0.7 percentage points. We hypothesize that the gender difference in health outcomes is due to the reform tightening eligibility particularly with respect to mental health conditions, which are more prevalent among female DI claimants. The evidence for the existence of substantial health effects implies that policy makers considering a DI reform should carefully balance the welfare gains from reduced moral hazard against losses not only from less coverage of income risks but also from deteriorated health.

Suggested Citation

  • Pilar Garcia-Gomez & Anne C. Gielen, 2014. "Mortality Effects of Containing Moral Hazard: Evidence from Disability Insurance Reform," Tinbergen Institute Discussion Papers 14-102/V, Tinbergen Institute, revised 26 Oct 2017.
  • Handle: RePEc:tin:wpaper:20140102
    as

    Download full text from publisher

    File URL: https://papers.tinbergen.nl/14102.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. A. Bovenberg, 2000. "Reforming Social Insurance in The Netherlands," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 345-368, May.
    2. Browning, Martin & Heinesen, Eskil, 2012. "Effect of job loss due to plant closure on mortality and hospitalization," Journal of Health Economics, Elsevier, vol. 31(4), pages 599-616.
    3. Chen, Susan & van der Klaauw, Wilbert, 2008. "The work disincentive effects of the disability insurance program in the 1990s," Journal of Econometrics, Elsevier, vol. 142(2), pages 757-784, February.
    4. Bound, John, 1989. "The Health and Earnings of Rejected Disability Insurance Applicants," American Economic Review, American Economic Association, vol. 79(3), pages 482-503, June.
    5. Alois Stutzer & Rafael Lalive, 2004. "The Role of Social Work Norms in Job Searching and Subjective Well-Being," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 696-719, June.
    6. Bonsang, Eric & Adam, Stéphane & Perelman, Sergio, 2012. "Does retirement affect cognitive functioning?," Journal of Health Economics, Elsevier, vol. 31(3), pages 490-501.
    7. Mazzonna, Fabrizio & Peracchi, Franco, 2012. "Ageing, cognitive abilities and retirement," European Economic Review, Elsevier, vol. 56(4), pages 691-710.
    8. David H. Autor & Mark G. Duggan, 2003. "The Rise in the Disability Rolls and the Decline in Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 157-206.
    9. Moore, Timothy J., 2015. "The employment effects of terminating disability benefits," Journal of Public Economics, Elsevier, vol. 124(C), pages 30-43.
    10. Jan-Maarten van Sonsbeek & Raymond H. J. M. Gradus, 2013. "Estimating the effects of recent disability reforms in the Netherlands," Oxford Economic Papers, Oxford University Press, vol. 65(4), pages 832-855, October.
    11. Viscusi, W Kip & Aldy, Joseph E, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
    12. David A. Wise, 2012. "Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms," NBER Books, National Bureau of Economic Research, Inc, number wise11-1, September.
    13. Karlström, Anders & Palme, Mårten & Svensson, Ingemar, 2008. "The employment effect of stricter rules for eligibility for DI: Evidence from a natural experiment in Sweden," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2071-2082, October.
    14. Mark Duggan & Scott A. Imberman, 2009. "Why Are the Disability Rolls Skyrocketing? The Contribution of Population Characteristics, Economic Conditions, and Program Generosity," NBER Chapters, in: Health at Older Ages: The Causes and Consequences of Declining Disability among the Elderly, pages 337-379, National Bureau of Economic Research, Inc.
    15. Guido Imbens & Karthik Kalyanaraman, 2012. "Optimal Bandwidth Choice for the Regression Discontinuity Estimator," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 933-959.
    16. Staubli, Stefan, 2011. "The impact of stricter criteria for disability insurance on labor force participation," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1223-1235, October.
    17. Lex Borghans & Anne C. Gielen & Erzo F. P. Luttmer, 2014. "Social Support Substitution and the Earnings Rebound: Evidence from a Regression Discontinuity in Disability Insurance Reform," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 34-70, November.
    18. Susann Rohwedder & Robert J. Willis, 2010. "Mental Retirement," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 119-138, Winter.
    19. Fabrizio Mazzonna & Franco Peracchi, 2017. "Unhealthy Retirement?," Journal of Human Resources, University of Wisconsin Press, vol. 52(1), pages 128-151.
    20. Daniel Sullivan & Till von Wachter, 2009. "Job Displacement and Mortality: An Analysis Using Administrative Data," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 1265-1306.
    21. Marcus Eliason & Donald Storrie, 2009. "Does Job Loss Shorten Life?," Journal of Human Resources, University of Wisconsin Press, vol. 44(2).
    22. 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.
    23. Pierre Koning & Maarten Lindeboom, 2015. "The Rise and Fall of Disability Insurance Enrollment in the Netherlands," Journal of Economic Perspectives, American Economic Association, vol. 29(2), pages 151-172, Spring.
    24. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
    25. repec:reg:rpubli:282 is not listed on IDEAS
    26. Kevin Milligan & David A. Wise, 2012. "Introduction and Summary to "Social Security and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms"," NBER Chapters, in: Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participatio, pages 1-39, National Bureau of Economic Research, Inc.
    27. Pilar García-Gómez & Hans-Martin Gaudecker & Maarten Lindeboom, 2011. "Health, disability and work: patterns for the working age population," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(2), pages 146-165, April.
    28. Diamond, Peter & Sheshinski, Eytan, 1995. "Economic aspects of optimal disability benefits," Journal of Public Economics, Elsevier, vol. 57(1), pages 1-23, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anne M. Garvey & Manuel Ventura-Marco & Carlos Vidal-Meliá, 2019. "Does the pension system’s income statement really matter? A proposal for an NDC scheme with disability and minimum pension benefits," Documentos de Trabajo del ICAE 2019-22, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Garcia-Gomez, Pilar & Gielen, Anne C., 2014. "Health Effects of Containing Moral Hazard: Evidence from Disability Insurance Reform," IZA Discussion Papers 8386, Institute of Labor Economics (IZA).
    2. Koning, Pierre & Muller, Paul & Prudon, Roger, 2020. "Do Disability Benefits Hinder Work Resumption after Recovery?," IZA Discussion Papers 13971, Institute of Labor Economics (IZA).
    3. Garcia-Mandicó, Sílvia & García-Gómez, Pilar & Gielen, Anne C. & O’Donnell, Owen, 2020. "Earnings responses to disability insurance stringency," Labour Economics, Elsevier, vol. 66(C).
    4. Jeffrey Hemmeter & Michelle Stegman Bailey, 2016. "Earnings after DI: evidence from full medical continuing disability reviews," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-22, December.
    5. Richard V. Burkhauser & Mary C. Daly & Nicolas R. Ziebarth, 2016. "Protecting working-age people with disabilities: experiences of four industrialized nations [Absicherung von Personen mit Erwerbsminderung: Erfahrungen aus vier Industrieländern]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(4), pages 367-386, December.
    6. Shu, Pian, 2015. "Asset accumulation and labor force participation of disability insurance applicants," Journal of Public Economics, Elsevier, vol. 129(C), pages 26-40.
    7. Helge Liebert, 2021. "Does external medical review reduce disability insurance inflow?," Papers 2101.03117, arXiv.org.
    8. Haller, Andreas & Staubli, Stefan & Zweimüller, Josef, 2020. "Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits?," CEPR Discussion Papers 15121, C.E.P.R. Discussion Papers.
    9. Lawson, Nicholas, 2015. "Social program substitution and optimal policy," Labour Economics, Elsevier, vol. 37(C), pages 13-27.
    10. Tobias Müller & Stefan Boes, 2020. "Disability insurance benefits and labor supply decisions: evidence from a discontinuity in benefit awards," Empirical Economics, Springer, vol. 58(5), pages 2513-2544, May.
    11. Andreas Ravndal Kostol & Magne Mogstad, 2014. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work," American Economic Review, American Economic Association, vol. 104(2), pages 624-655, February.
    12. Liebert, Helge, 2019. "Does external medical review reduce disability insurance inflow?," Journal of Health Economics, Elsevier, vol. 64(C), pages 108-128.
    13. Börsch-Supan, Axel & Bucher-Koenen, Tabea & Hanemann, Felizia, 2017. "Does Disability Insurance Improve Health and Well-Being?," MEA discussion paper series 201709, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    14. Koning, Pierre & van Sonsbeek, Jan-Maarten, 2017. "Making disability work? The effects of financial incentives on partially disabled workers," Labour Economics, Elsevier, vol. 47(C), pages 202-215.
    15. Müller, Tobias & Boes, Stefan, 2016. "Disability Insurance Benefits and Labor Supply Choices: Evidence from a Discontinuity in Benefit Awards," MPRA Paper 70957, University Library of Munich, Germany.
    16. Silvia Garcia Mandico & Pilar (P.) Garcia-Gomez & Anne (A.C.) Gielen & Owen (O.A.) O'Donnell, 2018. "Earnings responses to disability benefit cuts," Tinbergen Institute Discussion Papers 18-023/V, Tinbergen Institute.
    17. Kuhn, Andreas & Staubli, Stefan & Wuellrich, Jean-Philippe & Zweimüller, Josef, 2020. "Fatal attraction? Extended unemployment benefits, labor force exits, and mortality," Journal of Public Economics, Elsevier, vol. 191(C).
    18. Matthew J. Hill & Jose I. Silva & Judit Vall Castello, 2019. "Act now: The effects of the 2008 Spanish disability reform," Health Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 906-920, July.
    19. Moore, Timothy J., 2015. "The employment effects of terminating disability benefits," Journal of Public Economics, Elsevier, vol. 124(C), pages 30-43.
    20. Deuchert, Eva & Eugster, Beatrix, 2019. "Income and substitution effects of a disability insurance reform," Journal of Public Economics, Elsevier, vol. 170(C), pages 1-14.

    More about this item

    Keywords

    disability insurance; moral hazard; health; mortality; regression discontinuity;
    All these keywords.

    JEL classification:

    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tin:wpaper:20140102. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/tinbenl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tinbergen Office +31 (0)10-4088900 (email available below). General contact details of provider: https://edirc.repec.org/data/tinbenl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.