Working Paper: NBER ID: w22419
Authors: Kathleen Mullen; Stefan Staubli
Abstract: A key component for estimating the optimal size and structure of disability insurance (DI) programs is the elasticity of DI claiming with respect to benefit generosity. Yet, in many countries, including the United States, all workers face identical benefit schedules, which are a function of one’s labor market history, making it difficult to separate the effect of the benefit level from the effect of unobserved preferences for work on individuals’ claiming decisions. To circumvent this problem, we exploit exogenous variation in DI benefits in Austria arising from several reforms to its DI and old age pension system in the 1990s and 2000s. We use comprehensive administrative social security records data on the universe of Austrian workers to compute benefit levels under six different regimes, allowing us to identify and precisely estimate the elasticity of DI claiming with respect to benefit generosity. We find that, over this time period, a one percent increase in potential DI benefits was associated with a 1.2 percent increase in DI claiming.
Keywords: Disability Insurance; Labor Force Participation; Benefit Generosity
JEL Codes: H53; H55; J14; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| DI benefit levels (H55) | DI claiming (Y40) |
| DI benefit levels (H55) | DI inflow rate (F21) |
| DI benefit levels (H55) | application rates for DI benefits (J14) |
| DI benefit levels (H55) | likelihood of being awarded benefits (H55) |
| DI benefit levels (H55) | application rates (C88) |
| DI benefit levels (H55) | DI claiming among involuntarily unemployed individuals (J65) |
| DI benefit levels (H55) | DI claiming among prime-age workers (J79) |