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Moral Hazard and Disability Insurance- Evidence from the fourth and fifth revision of the Swiss Disability Insurance Act

abstract As any other social insurance too, the Disability Insurance (DI) suffers from an inherent problem: On the one hand, the DI insures the individual against the risk that working is impossible due to a long-lasting health problem. With risk adverse individuals, the insurance is socially desirable and does contribute to aggregate welfare. On the other hand, the DI may be subject to moral hazard. Since DI benefits represent a non-earned alternative to (potentially uncertain) labor incomes, individuals whose disutility of working is large enough may apply for DI benefits or stay in the DI even though they are able to work. This behavior increases the costs for DI, which is usually paid by the general population in form of a pay-roll tax. This research project seeks to identify moral hazard in the Swiss social insurance setting using reg-ulatory changes imposed by the fourth and fifth revision of the Disability Insurance Act as natural experiments. The following research questions will be addressed: (1) Do systematic measurement errors in the assessment process exist? (2) Does stricter medical screening reduce the number of new DI pensions? (3) Do lower pension payments increase labor force participation and thus, outflow from the DI?
   
keywords disability insurance, moral hazard, fourth and fifth revision of the Swiss Disability Insurance Act
   
partner
type applied research project
status ongoing
start of project 2012
end of project 2014
additional informations Start-up funding provided from the Economic Policy profile area
topics Economics, social insurance, disability insurance, moral hazard
methods Applied empirical research
profile area SEPS - Economic Policy
contact Eva Deuchert