Disability Insurance and Health in Europe and the US

Enrica Croda, Università Ca' Foscari Venezia

Rising fiscal pressure from disability insurance programs have increased pressure on governments to scale back benefits. At the same time, restricting enrollments based on stricter eligibility criteria have raised concerns about workers in poor health unable to qualify for disability insurance. We first use data from the Survey of Health, Ageing, and Retirement in Europe (SHARE) and the Health and Retirement Study (HRS) to compare patterns of health and DI participation across countries, finding little or no evidence of tradeoffs between health severity for DI enrollees and overall enrollment rates. We then develop a model of disability insurance participation depending on health, market opportunities, and country-level eligibility criteria that is potentially consistent with the aggregate empirical evidence. The model is estimated using SHARE and HRS, with estimates suggesting a pervasive and adverse impact of U.S. strategies for containing costs, such as long waiting periods and strict medical limitations on eligibility.