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Federal Reserve Bank of St. Louis
Occupational hazards and social disability insurance
Using retrospective data, we introduce evidence that occupational exposure significantly affects disability risk. Incorporating this into a general equilibrium model, social disability insurance (SDI) affects welfare through (i) the classic, risk-sharing channel and (ii) a new channel of occupational reallocation. Both channels can increase welfare, but at the optimal SDI they are at odds. Welfare gains from additional risk-sharing are reduced by overly incentivizing workers to choose risky occupations. In a calibration, optimal SDI increases welfare by 2.6% relative to actuarially fair insurance, mostly due to risk sharing.
Cite this item
Amanda M. Michaud & David Wiczer, Occupational hazards and social disability insurance, Federal Reserve Bank of St. Louis, Working Papers 2014-24, 26 Aug 2014, revised 03 Oct 2016.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
Keywords: Disability Insurance; Occupational Choice; Optimal Policy
This item with handle RePEc:fip:fedlwp:2014-024
is also listed on EconPapers
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