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Social Insurance and Social Safety Net in the United States

Paper Session

Friday, Jan. 3, 2020 10:15 AM - 12:15 PM (PDT)

Marriott Marquis, Catalina
Hosted By: Econometric Society
  • Chair: Luigi Pistaferri, Stanford University

Anti Insurance: The Perverse Targeting of Health Insurance

Lee Lockwood
,
University of Virginia

Abstract

Health insurance typically covers not only the small probability, large loss events emphasized by theory but also routine services like regular checkups. Usage of such services responds to liquidity shocks; people cut back when times are tight, such as during an unemployment spell. As a result, coverage of such services is least valuable in the states of the world in which marginal utility is greatest---an anti-insurance effect. Whether the net effect of health insurance is to improve or worsen risk exposure depends on the insured's relative exposure to health versus non-health risks. I find that for many U.S. households, health insurance worsens risk exposure; on average it targets states of the world in which marginal utility is relatively low. This highlights an important cost of the many policies that subsidize health insurance or health care.

Take-Up and Targeting: Experimental Evidence from SNAP

Matthew Notowidigdo
,
Northwestern University

Abstract

We develop a framework for welfare analysis of interventions designed to increase take-up of social safety net programs in the presence of potential behavioral biases. We calibrate the key parameters using a randomized field experiment in which 30,000 elderly individuals not enrolled in – but likely eligible for – the Supplemental Nutrition Assistance Program (SNAP) are either provided with information that they are likely eligible, provided with this information and also offered assistance in applying, or are in a “status quo” control group. Only 6 percent of the control group enrolls in SNAP over the next 9 months, compared to 11 percent of the Information Only group and 18 percent of the Information Plus Assistance group. The individuals who apply or enroll in response to either intervention receive lower benefits and are less sick than the average enrollee in the control group. We present evidence consistent with the existence of optimization frictions that are greater for needier individuals, which suggests that the poor targeting properties of the interventions reduce their welfare benefits.

Disability Insurance: Error Rates and Gender Differences

Hamish Low
,
University of Oxford
Luigi Pistaferri
,
Stanford University

Abstract

We show the extent of errors made in the award of disability insurance using HRS data matched with Social Security administrative data. We document large gender differences in disability insurance programs admission rates and type I error rates. In particular, women who apply for DI/SSI are 13 percentage point less likely to be awarded benefits than men, controlling for health, occupation and a host of demographic characteristics. Women who self-report to be disabled are 20 percentage points more likely to be rejected than observationally similar men. We investigate whether these gender differences in type 1 errors can be explained by women being in better health than men, by women having lower pain thresholds or women applying more readily for insurance. None of these explanations are consistent with the data. We use evidence from vignettes to suggest the SSA has different acceptance thresholds for men and women. We show the negative labour supply consequences of these rejection rates for women.

Beyond Health: The Welfare Effects of Disability Insurance

Manasi Deshpande
,
University of Chicago
Lee Lockwood
,
University of Virginia

Abstract

TBD
JEL Classifications
  • J22 - Time Allocation and Labor Supply
  • H2 - Taxation, Subsidies, and Revenue