Disability Insurance Benefits and Labor Supply
利用加拿大两个残疾保险项目福利差异，估计福利慷慨度对劳动力参与率的弹性为0.28-0.36，为评估残疾保险最优规模提供关键参数。
Disability Insurance (DI) is a public program that provides income support to persons unable to continue work due to disability. The difficulty of defining disability, however, has raised the possibility that this program may be subsidizing the early retirement of workers who are not sufficiently disabled. A critical input for assessing the optimal size of the DI program is therefore the elasticity of labor force participation with respect to benefits generosity. Unfortunately, this parameter has been difficult to estimate in the context of the U.S. DI program, since all workers face an identical benefits schedule. I surmount this problem by studying the experience of Canada, which operates two distinct DI programs, for Quebec and the rest of Canada. The latter program raised its benefits by 36 % in January, 1987, while benefits were constant in Quebec, providing exogenous variation in benefits generosity across similar workers. I study this relative benefits increase using both simple "difference-in-difference " estimators and more parameterized estimators that exploit the differential impact of this policy change across workers. I find that there was a sizeable labor supply response to the policy change; my central estimates imply an elasticity of labor force non-participation with respect to DI benefits of 0.28 to 0.36. * I am grateful to Courtney Coile, Kevin Frisch and particularly Sue Dynarski for excellent research