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Welfare and output enhancing moral hazard [electronic resource] : disability benefits and endogenous occupational choice / Paul Frijters, Micheal A. Shields
Bib ID 6100698
Format BookBook, OnlineOnline
Author
Frijters, Paul
 
Online Access
Online Versions
Description Brisbane, Qld. : School of Economics, University of Queensland, 2001 
Series

Discussion paper (University of Queensland. School of Economics : Online) ; 445. 1833-1068

PANDORA electronic collection.

Technical Details

Mode of access: Online. Address as at 17/09/2012: http://www.uq.edu.au/economics/445-welfare-and-output-enhancing-moral-hazard-disability-benefits-and-endogenous-occupational-choice 

System requirements: Adobe Acrobat reader to read PDF file. 

Summary

One of the most prominent trends in OECD countries over the last 30 years has been the sharp increase in incidence of early retirement, and in particular the permanent take-up of disability benefits. In this paper we construct a theoretical model that shows how occupational choices, in terms of the associated health risks, made by the young can be affected by the expected provision of publicly funded disability benefits in later life. We find that because individuals are risk-averse, they take insufficient risks in the absence of insurance. Disability benefits lead to riskier aggregate behaviour, which in turn increases output and welfare at low levels of benefits, but will lead to excessive risk taking at high benefit levels to the detriment of output and welfare. We also show that the full impact of changes to the generosity of disability benefits in terms of increasing the take-up of such benefits is not immediate, but may take many years to realise because the previous career choices are largely irreversible. This time lag is consistent with the experiences of a number of countries over the last 30 years.

Notes

Title from title screen (viewed on Sept. 17, 2012)

Includes bibliographical references (p. 17-18)

Text and graphics.

Selected for archiving

Subjects Disability retirement -- OECD countries -- Econometric models.  |  Disability insurance -- OECD countries -- Econometric models.  |  Disability insurance claimants -- OECD Countries.  |  Labor market -- OECD countries.  |  Australian
Other authors/contributors Shields, Michael A  |  University of Queensland. School of Economics

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