Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329806 
Year of Publication: 
2025
Citation: 
[Journal:] Econometrica [ISSN:] 1468-0262 [Volume:] 93 [Issue:] 5 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2025 [Pages:] 1697-1737
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
Public disability insurance (DI) programs in many countries face growing fiscal pressures, prompting efforts to reduce spending. In this paper, we investigate the welfare effects of expanding the role of private insurance markets in the face of public DI cuts. We exploit a reform that abolished one part of German public DI and use unique data from a large insurer. We document modest crowding‐out effects of the reform, such that private DI take‐up remains incomplete. We find no adverse selection in the private DI market. Instead, private DI tends to attract individuals with high income, high education, and low disability risk. Using a revealed preference approach, we estimate individual insurance valuations. Our welfare analysis finds that partial DI provision via the voluntary private market can improve welfare. However, distributional concerns may justify a full public DI mandate.
Subjects: 
Disability insurance
social insurance
privatization
risk‐based selection
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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