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Screening Stringency in the Disability Insurance Program

  • Per Johansson , Lisa Laun and Tobias Laun EMAIL logo

Abstract

We propose a strategy for assessing how the inflow to the disability insurance program has been governed over time. Using ex-post mortality, we analyze the ex-ante health of individuals entering the program, compared to individuals not entering the program in the same year. Applying this strategy to Sweden, we find large variation in the relative health of new beneficiaries compared to non-beneficiaries over time. Some of the fluctuations correspond well to formal changes to screening stringency. However, we also find large variation in health during periods when no changes to formal eligibility criteria have been pursued.

JEL Classification: C41; I18; J14

Acknowledgments

We are thankful for comments from Marcus Eliason, John Ham, Karl-Oskar Lindgren, Martin Lundin, Eva Mörk, Mårten Palme and Josef Zweimüller. We thank the editor and the anonymous referee for their useful suggestions in improving the paper. We also thank seminar participants at the Institute for Evaluation of Labour Market and Education Policy and the Department of Economics, Uppsala University. Lisa Laun and Tobias Laun gratefully acknowledge financial support from Jan Wallander and Tom Hedelius Foundation.

References

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  1. 1

    See, e.g. Wise (2012) for a detailed description of DI programs in several developed countries.

  2. 2

    See Krueger and Meyer (2002) for a review of several studies.

  3. 3
  4. 4
  5. 5

    The total compensation rate, including occupational insurances, is about 80% for workers in the private and local government sector and about 85% for workers in the central government sector, for earnings below the ceiling. Sjögren Lindquist and Wadensjö (2007) estimate that 96% of Swedish workers are covered by a collective agreement allowing for occupational insurance and that almost all of these workers fulfill the criteria for receiving occupational insurance. Between 60 and 80% of workers claim occupational insurance when receiving disability benefits.

  6. 6

    This assumption is not very restrictive and can be motivated by a disutility of working which is decreasing in health. In other words, a healthy individual has a low disutility of working as well as a low probability of receiving disability benefits. This makes working more attractive than applying for disability benefits. An individual in bad health, on the other hand, faces a large disutility of working while at the same time having a high probability of applying successfully, which makes applying for disability benefits more attractive than working.

  7. 7

    This change resembles the results of Parsons (1991) who shows that the composition of disability benefit applicants depends, among other things, on the stringency of the screening process. However, he considers only two health classes, disabled and able.

  8. 8

    There are examples of using mortality as a measure of work capacity in the literature. For example, Milligan and Wise (2012).

  9. 9

    This is primarily a concern if such an effect is heterogeneous in the population. A homogeneous effect would shift the estimated mortality ratio but not affect the variation over time, which is what we are interested in analyzing in this paper.

  10. 10

    Most individuals remain in the DI program until retirement. The simplification to regard the first year of benefit collection as the entry year leads to only 2.4% of the registrations of program participation not corresponding to the data.

  11. 11

    The transitory spike in entry in 1992 is not reflected in a change in how program inflow was governed. Anecdotal evidence suggests that a shortage of caseworkers led to a queue of cases during the preceding years and that the spike in 1992 is due to a shifting of assessments across years. This would explain that the mortality ratio is unaffected.

  12. 12

    Recall that we control for the relatively lower mortality of women compared to men in the population by estimating the parameter .

Published Online: 2014-1-22
Published in Print: 2014-7-1

©2014 by Walter de Gruyter Berlin / Boston

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