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Disability shocks and consumption behavior

Author

Listed:
  • Luigi Pistaferri

    (Stanford University)

  • Hamish Low

    (University of Cambridge)

Abstract

We use longitudinal data on consumption, disability status, disability insurance recipiency, and earnings to measure the welfare loss of disability shocks. We decompose earnings risk into shocks due to the emergency of disability and shocks to general productivity. We then examine the issue of optimality of the DI program, accounting for moral hazard issues having to do with healthy people applying for DI benefits in response to permanent negative shocks to their general productivity.

Suggested Citation

  • Luigi Pistaferri & Hamish Low, 2007. "Disability shocks and consumption behavior," 2007 Meeting Papers 323, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:323
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