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American Economic Review Vol. 109 No. 7 2019

Disability Benefits, Consumption Insurance, and Household Labor Supply

David Autor1; Andreas Kostøl2; Magne Mogstad3; Bradley Setzler4

1 Department of Economics, Massachusetts Institute of Technology, 50 Memorial Drive, E52-371, Cambridge, MA 02142, and National Bureau of Economic Research (email: ) · 2 Research Department, Norges Bank, Postboks 1179 Sentrum, 0107 Oslo, Norway, and Statistics Norway (email: ) · 3 Department of Economics, University of Chicago, 1126 E. 59th Street, Chicago, IL 60637, Statistics Norway, and NBER (email: ) · 4 Department of Economics, University of Chicago, 1126 E 59th Street, Chicago, IL 60637 (email: )

open access

Abstract

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.

DOI
10.1257/aer.20151231
Volume
109
Issue
7
Pages
2613-2654
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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