The Economic Implications of Public Disability Insurance in the United States

A review of previous analyses of labor supply effects of Social Security Disability Insurance (DI) concludes that estimates of labor supply effects and net social costs are upward biased because they ignore interactions between DI and other insurances. A model of optimal insurance, postinjury accommodations, and labor supply shows that reduction in labor supply and increase in consumption when disabled do not necessarily imply moral hazard. Optimal postinjury accommodations vary inversely with firm size. The Americans with Disabilities Act will reduce wages and labor supply of healthy workers, particularly in small firms. Effects on labor supply of the disabled are ambiguous. Disciplines Disability Law | Insurance | Other Education | Other Public Health This journal article is available at ScholarlyCommons: http://repository.upenn.edu/hcmg_papers/120 NORC at the University of Chicago The Economic Implications of Public Disability Insurance in the United States Author(s): Patricia M. Danzon Source: Journal of Labor Economics, Vol. 11, No. 1, Part 2: U.S. and Canadian Income Maintenance Programs (Jan., 1993), pp. S170-S200 Published by: The University of Chicago Press on behalf of the Society of Labor Economists and the NORC at the University of Chicago Stable URL: http://www.jstor.org/stable/2535171 Accessed: 06-06-2016 16:00 UTC Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://about.jstor.org/terms JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. NORC at the University of Chicago, The University of Chicago Press, Society of Labor Economists are collaborating with JSTOR to digitize, preserve and extend access to Journal of Labor Economics This content downloaded from 130.91.116.52 on Mon, 06 Jun 2016 16:00:15 UTC All use subject to http://about.jstor.org/terms The Economic Implications of Public Disability Insurance in the United States Patricia M. Danzon, University of Pennsylvania A review of previous analyses of labor supply effects of Social Security Disability Insurance (DI) concludes that estimates of labor supply effects and net social costs are upward biased because they ignore interactions between DI and other insurances. A model of optimal insurance, postinjury accommodations, and labor supply shows that reduction in labor supply and increase in consumption when disabled do not necessarily imply moral hazard. Optimal postinjury accommodations vary inversely with firm size. The Americans with Disabilities Act will reduce wages and labor supply of healthy workers, particularly in small firms. Effects on labor supply of the disabled are ambiguous.