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Faculty of Economics

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Ball, S. and Low, H.

Do self-insurance and disability insurance prevent consumption loss on disability?


Vol. 81(323) pp. 468-490 (2014)

Abstract: We show the extent to which public insurance and self-insurance mitigate the cost of health shocks that limit the ability to work. We use consumption data from the UK to estimate insurance provided by government disability programmes. Individuals with a work-limiting health condition, in receipt of disability insurance, have 9% lower consumption than those without such a condition. Self-insurance through savings and a work-active partner each improve outcomes by about 3%. Reduced generosity of disability insurance after 1995 is associated with increases in the consumption loss on disability, implying worse insurance, but with fewer false claimants, implying better targeting.

Keywords: Disability insurance, Living standards, Consumption, Liquidity constraints

JEL Codes: D91, J14, H53

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