Abstract
I provide novel evidence on how private disability insurance (DI) affects public DI. Using comprehensive contract data from a major German insurer and representative survey data I estimate a dynamic life-cycle model of insurance, savings, and labor supply choices. I find private DI imposes significant fiscal costs on public DI, exacerbated by more high-income, low-risk individuals claiming public DI. Hence, private DI mutes welfare gains from more generous public DI programs and if they become too generous, having a private market reduces welfare. Conversely, private DI can offset welfare losses from public DI cuts, allowing for welfare-enhancing and cost-reducing reforms.
The seminar will be held in room 1140 (11th floor) at Eilert Sundts Hus. The address is Moltke Moes vei 31.