Disability Benefits, Consumption Insurance, and Household Labor Supply
There is no evaluation of the consequences of Disability Insurance (DI) receipt that captures the effects on households' net income and consumption expenditure, family labor supply, or benefits from other programs. Combining detailed register data from Norway with an instrumental variables approach based on random assignment to appellant judges, we comprehensively assess how DI receipt affects these understudied outcomes. To consider the welfare implications of the findings from this instrumental variables approach, we estimate a dynamic model of household behavior that translates employment, reapplication and savings decisions into revealed preferences for leisure and consumption. The model-based results suggest that on average, the willingness to pay for DI receipt is positive and sizable. Because spousal labor supply strongly buffers the household income and consumption effects of DI allowances, the estimated willingness to pay for DI receipt is smaller for married than single applicants.
This research was supported by the U.S. Social Security Administration through grant #1 DRC12000002-03 to the National Bureau of Economic Research as part of the SSA Disability Research Consortium. The findings and conclusions expressed are solely those of the authors and do not represent the views of SSA, any agency of the Federal Government, or the NBER. The project also received financial support from the Norwegian Research Council. We are grateful to Richard Blundell, Raj Chetty, Amy Finkelstein, Kai Liu, Nathan Hendren, Hamish Low, Luigi Pistaferri, Alessandra Voena, three anonymous referees, and the editor of this journal for valuable input and guidance, and to Knut Brofoss, Espen Vihle and Runar Narvland for their help in accessing the data and in understanding the institutional details. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
David Autor & Andreas Kostøl & Magne Mogstad & Bradley Setzler, 2019. "Disability Benefits, Consumption Insurance, and Household Labor Supply," American Economic Review, vol 109(7), pages 2613-2654. citation courtesy of