An International Comparison of the Efficiency of Government Disability Programs

Enrica Croda, Jonathan Skinner, Laura Yasaitis

NBER Disability Research Center Paper No. NB 13-08
Issued in September 2013

There are large variations across countries in the fraction of the workforce receiving disability insurance (DI) payments, ranging in 2008 from 3.8 percent in Spain to 10.2 percent in Sweden. Previous research has stressed the importance of institutional features of DI programs in explain-ing overall costs, but much less is known about the efficiency of such programs in avoiding Type 1 error (providing benefits to healthy recipients) or Type 2 error (denying benefits to unhealthy applicants). In this paper, we draw on the Survey of Health, Ageing, and Retirement in Europe (SHARE) and the Health and Retirement Study (HRS) in the United States for micro-level data on people between the ages of 50 and 64 during 2004, 2006, and 2010 to address this question. Using the Poterba, Venti, and Wise health index and self-reported health, we find large differ-ences in the efficiency of DI systems across countries, with Switzerland, Italy, Denmark, and the U.S. ranking above, and Sweden and the Netherlands ranking below, most European countries.

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