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Labour Supply and Welfare Effects of Disability Insurance: A Survey

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Abstract

This paper provides an overview of the labour supply disincentive and the insurance effect of public disability insurance (DI) programmes targeted to permanently disabled adults. It builds on previous survey papers to review the empirical findings on the direction and magnitude of the DI effects on labour market participation. It particularly focuses on the consequences of altering specific parameters of the DI schemes, such as benefit amount, screening stringency and return-to-work incentives. Finally, it surveys the recent literature investigating the level of insurance against work-limiting health impairments provided by DI programmes and the value of DI for beneficiaries. This literature is of particular relevance in a period in which many countries are facing the challenge of reforming DI schemes to guarantee their sustainability.

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Notes

  1. Estimates are classified according to the estimation strategy used, either times series or cross-sectional studies. The former are likely to be affected by other factors varying simultaneously with the policy change, the latter suffer from several issues regarding the identification strategy and the availability of prospective data.

  2. They merged a number of administrative data sets. A 1% sample of all initial applications to DI from 1981 to 1999 is merged with the Social Security Administration’s (SSA) Master Beneficiary Record, which has information on the final benefit received, and with the SSA’s Master Earnings File, which has longitudinal information on earnings from 1978 to 2006.

  3. Both SSDI and SSI are considered.

  4. The Canadian DI system is similar to the US system, with the main differences being the lump-sum component of the benefit in Canada as opposed to a primarily earnings related benefit in the US and the stringency of the screening process which is higher in the US than in Canada.

  5. I place the review of this literature in this section as the key policy change exploited by these contributions is a change in the payments’ generosity.

  6. Autor and Duggan (2007) use data from the March Supplement to the Current Population Survey (CPS) for calendar years 2000 to 2006 for veteran males born between 1941 and 1952. Coile et al. (2015) use time-series data from the Current Population Survey for 1980 through 2014 and show that the LMP of veterans has declined with a pattern consistent with the increase in the Disability Compensation programme.

  7. The administrative records cover 4% of the individuals who had contributed towards the social security system or had received contributory DI benefit during 2007.

  8. The reintegration report summarizes the reintegration plan made by the employer and employee together, in which they specify an aim (resumption of current/other job under current/accommodated conditions) and the steps needed to reach that aim, and the outcome of the plan’s steps.

  9. They use the entire panel, which covers a period of 48 years (1968–2015), and select male household heads aged 22 to 61 who were interviewed for at least six years.

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  1. Department of Economics and Management, University of Padua, via del Santo 33, 35123, Padua, Italy

    Chiara Dal Bianco

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  1. Chiara Dal Bianco
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Dal Bianco, C. Labour Supply and Welfare Effects of Disability Insurance: A Survey. Ital Econ J 5, 161–189 (2019). https://doi.org/10.1007/s40797-019-00086-z

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