Mortality Effects of Containing Moral Hazard: Evidence from Disability Insurance Reform

Tinbergen Institute Discussion Paper 14-102/V

IZA Discussion Paper No. 8386

44 Pages Posted: 8 Aug 2014 Last revised: 11 Nov 2017

Pilar Garcia-Gomez

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Anne Gielen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Multiple version iconThere are 2 versions of this paper

Date Written: October 26, 2017

Abstract

exploit an age discontinuity in a Dutch disability insurance (DI) reform to identify the health impact of stricter eligibility criteria and reduced generosity. Our results show substantial adverse effects on life expectancy for women subject to the more stringent criteria. A €1,000 reduction in annual benefits leads to a 2.4 percentage points higher probability of death more than 10 years after the reform. This negative health effect is restricted to women with low pre-disability earnings. We find that the mortality rate of men subject to the stricter rules is reduced by 0.7 percentage points. We hypothesize that the gender difference in health outcomes is due to the reform tightening eligibility particularly with respect to mental health conditions, which are more prevalent among female DI claimants. The evidence for the existence of substantial health effects implies that policy makers considering a DI reform should carefully balance the welfare gains from reduced moral hazard against losses not only from less coverage of income risks but also from deteriorated health.

Keywords: disability insurance, moral hazard, health, mortality, regression discontinuity

JEL Classification: I14, H53, I38

Suggested Citation

Garcia-Gomez, Pilar and Gielen, Anne, Mortality Effects of Containing Moral Hazard: Evidence from Disability Insurance Reform (October 26, 2017). Tinbergen Institute Discussion Paper 14-102/V; IZA Discussion Paper No. 8386. Available at SSRN: https://ssrn.com/abstract=2477322 or http://dx.doi.org/10.2139/ssrn.2477322

Pilar Garcia Gomez (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Anne Gielen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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