Essays on the Effects of Social Insurance for Disability

Abstract

This dissertation examines how social insurance, family support and work capacity enhance individuals' economic well-being following significant health and income shocks.

I first examine the extent to which the liquidity-enhancing effects of Worker's Compensation (WC) benefits outweigh the moral hazard costs. Analyzing

administrative data from Oregon, I estimate a hazard model exploiting variation in the timing and size of a retroactive lump-sum WC payment to decompose

the elasticity of claim duration with respect to benefits into the elasticity with respect to an increase in cash on hand, and a decrease

in the opportunity cost of missing work. I find that the liquidity effect accounts for 60 to 65 percent of the increase

in claim duration among lower-wage workers, but less than half of the increase for higher earners.

Using the framework from Chetty (2008), I conclude that the insurance value of WC exceeds the distortionary cost, and

increasing the benefit level could increase social welfare.

Next, I investigate how government-provided disability insurance (DI) interacts with private transfers to disabled individuals

from their grown children. Using the Health and Retirement Study,

I estimate a fixed effects, difference in differences regression to compare transfers between DI recipients and two control groups: rejected applicants and a

reweighted sample of disabled non-applicants. I find that DI reduces the probability of receiving a transfer by no more than 3 percentage points, or 10 percent.

Additional analysis reveals that DI could increase the probability of receiving a transfer in cases where children had limited prior information about the

disability, suggesting that DI could send a welfare-improving information signal.

Finally, Zachary Morris and I examine how a functional assessment could complement medical evaluations in determining eligibility for disability

benefits and in targeting return to work interventions. We analyze claimants' self-reported

functional capacity in a survey of current DI beneficiaries to estimate the share of disability claimants able to do work-related activity. We estimate that 13

percent of current DI beneficiaries are capable of work-related activity.

Furthermore, other characteristics of these higher-functioning beneficiaries are positively correlated with employment, making them an appropriate target for return to work

interventions.