Template-Type: ReDIF-Paper 1.0
Title: Privatizing Disability Insurance
Author-Name: Arthur Seibold
Author-Email: seibold@uni-mannheim.de
Author-Name: Sebastian Seitz
Author-Email: sebastian.seitz@manchester.ac.uk
Author-Name: Sebastian Siegloch
Author-Email: siegloch@wiso.uni-koeln.de

Classification-JEL: H55, G22, G52
Keywords: disability insurance, social insurance, mandate, privatization, risk-based selection,
welfare

Abstract: Public disability insurance (DI) programs in many countries are under pressure to reduce spending
to maintain fiscal sustainability. 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 larger 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.

Note: 
Length: 96
Creation-Date: 2025-01
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp640
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2025_640