We study a fundamental reform of the public Disability Insurance (DI) system in Germany. Effective 2001, cohorts born after\u00a01960 are no longer eligible for \u201coccupational DI.\u201d Occupational DI (ODI) implies benefit eligibility when health shocks\u00a0prevent employees from working in their previous occupation. For the affected \u201cnotch cohorts\u201d, the new DI eligibility rules\u00a0require work disability in any job. Using administrative data, we first show that the reform significantly reduced the inflow\u00a0of new DI beneficiaries by more than 30% in the long-run. Next, we validate these findings using representative SOEP\u00a0household panel data comprised of the entire underlying population. The second part studies interaction effects with the\u00a0private ODI market. Using representative data, we do not find much evidence that the notch cohorts purchased individual\u00a0private ODI policies at significantly higher rates to compensate for the reduced generosity of the public DI system. To explain such low take-up, we employ a general equilibrium model featuring the roles of the social safety net, administrative\u00a0costs, and asymmetric information. These driving forces help explain three stylized facts in the individual experience-rated\u00a0private market for ODI policies: (1) low private ODI take-up and interaction effects with the public system—despite a high<\/div>\n
lifecycle work disability risk, (2) strong and positive income and health gradients in private ODI take-up, and (3) inversely\u00a0related income and health gradients in the lifecycle work disability risk. Simulations illustrate that policy reforms to lower\u00a0administrative costs have the greatest potential to foster take-up and flatten its income and health gradients.<\/div>\n","protected":false},"excerpt":{"rendered":"
Title: Fundamentally Reforming the DI System: Evidence from German Notch Cohorts Date: 10th May 2023 Time:13:00-14:00 Location: NUBS 2.14 Guest Speaker: Nicolas Ziebarth, ZEW If…
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