This chapter points to a tradeoff in the provision of disability insurance. Understanding the trade-off between its role as a health dependent social safety net and its use as a broader early retirement program is important for the design of a modern social security system, particularly at a time of financial strain on income support systems in most countries. Three explanations commonly offered for the large variation in disability insurance spending across countries: demographics, health, and institutions. First, while all European countries are aging, the specific age demographics of the population vary considerably from one country to another. A second potential cause for the cross-national variation is international variation in health and disability status, beyond just the difference in demographic composition. Third, public pension and disability support systems exert large incentive effects, which, according to each country's legislation and policies, significantly increase or decrease the take-up of benefits. The results of the cross-country study indicate that demographic and health-related differences explain very little of the cross-national variation in disability enrollment rates.
Keywords: demography; health; disability insurance; social safety; retirement program
Chapter. 8614 words. Illustrated.
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