Maxwell Kellogg, "Household Self-Insurance and the Value of Disability Insurance in the United States"
Job talk. Maxwell Kellogg is a PhD candidate in the Kenneth C. Griffin Department of Economics at the University of Chicago. He will present the paper "Household Self-Insurance and the Value of Disability Insurance in the United States".
The debate over whether and how to curtail growth in the U.S. Disability Insurance (DI) system stems from a trade-off between the system’s public costs and the economic value it provides to individuals. This paper studies the implications of household selfinsurance behaviors, such as family savings and spousal labor supply, for this trade-off and for the value of alternative reforms to the DI system. Using panel data on disability onset in U.S. households, I provide evidence that married workers benefit from both higher self-insurance capacity and higher utilization of DI compared to unmarried workers—who are left, by contrast, more exposed to the costs of disability. Guided by this evidence, I develop and estimate a life cycle model to infer the value of DI. Importantly, the model I develop takes into account household self-insurance capacity and the manner in which it may reduce implicit costs of acquiring DI benefits. Although model-based results suggest that expansions to DI tend to be welfare-improving, accounting for spousal labor supply reduces willingness to pay for reform by as much as 28 percent. Reforms that disproportionately benefit individuals with worse household self-insurance capacity by reducing the implicit costs of acquiring DI benefits, such as implementing a national temporary DI program, are especially valuable.
Host: Halvor Mehlum