Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits? Supplementary Material

Abstract

This paper provides supplementary theoretical and empirical analysis for a recent article in the Econometrica (2024) by Haller, Staubli, and Zweimüller titled “Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits?" Their article develops a sufficient statistics framework for analyzing the welfare effects of disability insurance (DI). It derives social-optimality conditions for the two main DI policy parameters: (i) eligibility rules and (ii) benefit levels. Applying this framework to two restrictive DI reforms in Austria, the article finds that tighter DI eligibility rules triggered higher fiscal cost savings and lower insurance losses, concluding that tighter DI eligibility rules dominate DI benefit reductions in scaling back the Austrian DI system.

Keywords: Disability insurance, screening, benefits, policy reform

JEL Classification: H53; H55; J14; J21; J65.