The Welfare Implications of Increasing Disability Insurance Benefit Generosity

Authors

John Bound, University of Michigan, Ann Arbor
Julie Berry Cullen, University of Michigan, Ann Arbor
Austin Nichols, University of Michigan, Ann Arbor
Lucie Schmidt, Williams CollegeFollow

Document Type

Article

Publication Date

12-1-2004

Publication Title

Journal of Public Economics

Abstract

In order to evaluate whether workers are over- or under-insured through the Disability Insurance (DI) program, we develop a framework that allows us to simulate the benefits as well as the costs associated with marginal changes in payment generosity from a representative cross-sectional sample of the population. Under the assumption that individuals are reasonably risk averse, we find that the typical worker would value increased benefits somewhat above the average costs of providing them. However, whether the benefit increases tend to lower or raise utility when we average across all individuals in our sample is sensitive to assumptions that affect the relative marginal utility of income to disabled individuals.

Keywords

Disability insurance, Income security, Labor supply disincentives

Volume

88

Issue

12

First Page

2487

Last Page

2514

DOI

10.1016/j.jpubeco.2003.07.007

ISSN

00472727

Comments

Peer reviewed accepted manuscript.

Recommended Citation

Bound, John; Cullen, Julie Berry; Nichols, Austin; and Schmidt, Lucie, "The Welfare Implications of Increasing Disability Insurance Benefit Generosity" (2004). Economics: Faculty Publications, Smith College, Northampton, MA.
https://scholarworks.smith.edu/eco_facpubs/93