This paper uses a life-cycle framework to evaluate the welfare consequences of reforming parts of the U.S. Disability Insurance (DI) program. Its authors estimate the model's parameters with data from the Panel Study of Income Dynamics (PSID) and then analyze the resulting effects on welfare and behavior.

University of Notre Dame

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In the U.S., the Disability Insurance (DI) program is a social welfare program that provides income and healthcare provisions for workers with disabilities that impede their ability to work.

Disability Insurance

Aim of Low and Pistaferri's Analysis

There were many false rejections, but also significantly few false acceptances. More false rejections can lead to greater welfare when the program is less strict (with greater coverage). Greater welfare is also associated with greater generosity and less reassessment. This leads to big impacts on the moderately-limited but also greater benefits for those most in need.

Important Findings of Low and Pistaferri's Analysis

Evaluating the Disability Insurance (DI) program involves several key questions:
- Are claimants genuinely able to work?
- Are those most in need receiving the insurance?
- How valuable is the insurance given program inefficiencies?

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