Estimating the Value of Public Insurance Using Complementary Private Insurance

The welfare associated with public insurance is often difficult to quantify because the demand for coverage is unobserved and thus cannot be used to analyze welfare. However, in many settings, individuals can purchase private insurance to supplement public coverage. This paper outlines an approach to use data and variation from private complementary insurance to quantify welfare associated with counterfactuals related to compulsory public insurance. We then apply this approach using administrative data on disability insurance. Our findings suggests that public disability insurance generates substantial surplus for the sample population, and there may be gains to increasing the generosity of coverage.