Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 2022, Volume 90, Issue 4

Beyond Health: Nonhealth Risk and the Value of Disability Insurance

https://doi.org/10.3982/ECTA19668
p. 1781-1810

Manasi Deshpande, Lee M. Lockwood

The public debate over disability insurance has centered on concerns about individuals without severe health conditions receiving benefits. We go beyond health risk alone to quantify the overall insurance value of U.S. disability programs, including value from insuring nonhealth risk. We find that disability recipients, especially those with less‐severe health conditions, are much more likely to have experienced a wide variety of nonhealth shocks than nonrecipients. Selection into disability receipt on the basis of nonhealth shocks is so strong among individuals with less‐severe health conditions that by many measures less‐severe recipients are worse off than more‐severe recipients. As a result, under baseline assumptions, benefits to less‐severe recipients have an annual surplus value (insurance benefit less efficiency cost) over cost‐equivalent tax cuts of $7700 per recipient, about three‐fourths that of benefits to more‐severe recipients ($9900). Insurance against nonhealth risk accounts for about one‐half of the value of U.S. disability programs.


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Supplemental Material

Supplement to "Beyond Health: Non-Health Risk and the Value of Disability Insurance"

Manasi Deshpande and Lee M. Lockwood

This online appendix contains material not found within the manuscript.

Supplement to "Beyond Health: Non-Health Risk and the Value of Disability Insurance"

Manasi Deshpande and Lee M. Lockwood

This zip file contains the replication files for the manuscript.