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Estimating the Value of Public Insurance Using Complementary Private Insurance
Marika Cabral1, Mark R Cullen2
1Department of Economics, University of Texas at Austin, 2225 Speedway, BRB 2.152, Austin, TX 78712, and NBER.
American Economic Journal. Economic Policy
|February 12, 2024
Summary
Quantifying public insurance welfare is challenging due to unobserved demand. This study uses private insurance data to estimate welfare gains from public disability insurance, suggesting increased generosity could be beneficial.
Area of Science:
- Economics
- Public Policy
- Insurance Markets
Background:
- Welfare analysis of public insurance is complicated by unobserved demand for coverage.
- Private insurance data offers a potential avenue to infer welfare impacts of public programs.
- Disability insurance is a significant social welfare program with complex coverage dynamics.
Purpose of the Study:
- To develop and apply a novel method for quantifying the welfare effects of compulsory public insurance.
- To estimate the welfare gains associated with public disability insurance using administrative data.
- To explore the potential benefits of increasing the generosity of public disability insurance coverage.
Main Methods:
- Utilizing variation in private complementary insurance to proxy for unobserved demand for public insurance.
- Applying an econometric approach to administrative data on disability insurance enrollment and benefits.
- Conducting a counterfactual welfare analysis based on observed private insurance behavior.
Main Results:
- Public disability insurance generates substantial welfare surplus for the insured population.
- The current generosity of public disability insurance may not fully capture potential welfare gains.
- Evidence suggests a positive welfare impact from the existing public disability insurance system.
Conclusions:
- The proposed method effectively quantifies welfare impacts of public insurance using private market data.
- Public disability insurance provides significant economic benefits to recipients.
- Policy considerations should include the potential for welfare improvements through enhanced disability insurance generosity.
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