Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits?
Andreas Haller and co-authors published a new paper in Econometrica, one of the top journals in economics! In the paper, they develop a framework for evaluating the welfare effects of different disability insurance policies.
Title: Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits?
Abstract: This paper develops a sufficient statistics framework for analyzing the welfare effects of disability insurance (DI). We derive social‐optimality conditions for the two main DI policy parameters: (i) eligibility rules and (ii) benefit levels. Applying this framework to two restrictive DI reforms in Austria, we find that tighter DI eligibility rules triggered higher fiscal cost savings and lower insurance losses. Hence, tighter DI eligibility rules dominate DI benefit reductions in scaling back the Austrian DI system.