Fundamentally Reforming the DI System: Evidence from German Notch Cohorts

Yaming Cao; Bjoern Fischer; Johannes Micha Geyer; Nicolas R. Ziebarth

doi:10.3386/w30812

Fundamentally Reforming the DI System: Evidence from German Notch Cohorts

Yaming Cao, Bjoern Fischer, Johannes Micha Geyer & Nicolas R. Ziebarth

Working Paper 30812

DOI 10.3386/w30812

Issue Date December 2022

Revision Date March 2026

In 2001, Germany abolished public occupational disability insurance (ODI)—the second tier of public DI—for post-1960 cohorts. First, overall DI inflows decreased by a third in the long run. Second, representative data show at best modest increases in private ODI take-up in an individual risk-rated market without guaranteed issue. Third, an equilibrium model featuring interactions between the safety net, the first tier of public DI, and the private market illustrates that coverage denials and weak insurance demand due to complementary social insurance produce modest private ODI take-up with steep gradients by income and health. Finally, we simulate complementary reforms.

We thank Karen Kopecky for her willingness and patience in discussing the model with us. Further, we thank Axel Böersch-Supan, Martin Karlsson, Honglin Li, David Mccarthy, Jesse Matheson, Corina Mommaerts, Michal Myck, and Martin Salm, for excellent discussions of our work. We also thank Priyanka Anand, Rich Burkhauser, Courtney Coile, Nadja Dwenger, Peter Eibich, Liran Einav, Andreas Haller, Wolter Hassink, , Martin Karlsson, Felix Koenig, Pierre Koning, Camille Landais, Julie Lassebie, Nicole Maestas, Tim Moore, Kathleen Mullen, Michal Myck, Zhuan Pei, Gregor Pfeiffer, Stefan Pichler, Christopher Prinz, Regina Riphahn, Perry Singleton, Anna Salomons, Alfonso Sousa-Poza, Johannes Spinnewijn, Stefan Staubli, Petra Steinorth, Gerard van den Berg, Véra Zabrodina, Ulrich Zierahn, Peter Zweifel, and Joseph Zweimueller for constructive comments and suggestions. We also thank participants at the 16th IZA & 3rd IZA/CREST Conference: Labor Market Policy Evaluation (online), the 2023 ARIA meetings, the 2023 CEPRA/NBER Workshop on Aging and Health, the 2023 Essen Health Conference, the 2023 NBER Insurance Group Meeting, the 2023 meetings of the American Economic Association, the 2023Workshop on Disability Economics, the CEPR Public Economics Annual Virtual Symposium 2021: Health Meets Public Economics, CRC Summer School 2021, 2021 Barcelona GSE Summer Forum, the 2022 EEA-ESEM meetings in Milan, the 2022 EALE meetings, the 2022 EGRIE Seminar in Vienna, the 2022 Health Economics Committee of the German Economic Association, the 2022 VfS Conference in Basel, the 2022 SOLE meetings in Minneapolis, Utrecht University, Universidad Autónoma de Madrid, the University of Hohenheim, the University of Groningen, Monash University, Newcastle University, the Rotterdam Health Economics Seminar at the Tinbergen Institute, the OECD, and Oxford University. We are grateful for funding from the Alfred P. Sloan Foundation and the program “Economics of an Aging Workforce” through NBER (Grant number: 144862, PTE Award No: G-2019-12400). Johannes Geyer thanks the Joint-Programming-Initiative “More Years Better Lives” for financial support through the project PENSINEQ (Unequal ageing: life-expectancy, care needs and reforms to the welfare state). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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Yaming Cao, Bjoern Fischer, Johannes Micha Geyer, and Nicolas R. Ziebarth, "Fundamentally Reforming the DI System: Evidence from German Notch Cohorts," NBER Working Paper 30812 (2022), https://doi.org/10.3386/w30812.

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