Early Determinants of Work Disability in an International Perspective
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Early Determinants of Work Disability in an International Perspective Axel Börsch-Supan 1,2,3 & Tabea Bucher-Koenen 1,4,5 & Felizia Hanemann 1,2 # The Author(s) 2020
Abstract This study explores the interrelated roles of health and welfare state policies in the decision to take up disability insurance (DI) benefits due to work disability (WD), defined as the (partial) inability to engage in gainful employment as a result of physical or mental illness. We exploit the large international variation of health, self-reported WD, and the uptake of DI benefits in the United States and Europe using a harmonized data set with life history information assembled from SHARE, ELSA, and HRS. We find that the mismatch between WD and DI benefit receipt varies greatly across countries. Objective health explains a substantial share of the within-country variation in DI, but this is not the case for the variation across countries. Rather, most of the variation between countries and the mismatches are explained by differences in DI policies. Keywords Social security and public pensions . Work disability . Disability insurance .
International comparisons . Life histories
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s13524-02000902-7) contains supplementary material, which is available to authorized users.
* Axel Börsch-Supan boersch–[email protected]
1
Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy, Amalienstrasse 33, D-80799, Munich, Germany
2
Department of Economics and Business, Technical University of Munich (TUM), Munich, Germany
3
National Bureau of Economic Research (NBER), Cambridge, MA, USA
4
ZEW – Leibniz Center for European Economic Research, Mannheim, Germany
5
University of Mannheim, Mannheim, Germany
A. Börsch-Supan et al.
Introduction Work disability (WD) is the (partial) inability to engage in gainful employment due to physical or mental illness, resulting in early retirement and/or uptake of disability insurance benefits (Loisel and Anema 2014). Disability insurance (DI) is a substantial part of public social expenditures and an important part of the social safety net of all developed countries (OECD 2003, 2010). This study explores the relation between WD and DI from an international perspective. The design of WD insurance systems is a challenging task for policy-makers (Autor and Duggan 2003, 2006, 2010; Burkhauser et al. 1999; de Jong et al. 2011; Haveman and Wolfe 2000). Like almost all elements of modern social security systems, DI faces a trade-off (Aarts et al. 1996; Autor et al. 2016; Banks et al. 2004; Croda and Skinner 2009; Diamond and Sheshinski 1995). On the one hand, DI is a welcome and necessary part of the social safety net: it prevents income losses for those who lose their ability to work before they become eligible for old-age pensions. On the other hand, DI may be (mis-)used as an early retirement route even if the ability to work is not limited. Both self-reported WD
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