Current Research

Privatizing Disability Insurance

Co-Authors: Arthur Seibold and Sebastian Seitz

(Conditionally Accepted at Econometrica)

Public disability insurance (DI) programs in many countries are under pressure to reduce spending to maintain fiscal sustainability. In this paper, we investigate the welfare effects of expanding the role of private insurance markets in the face of public DI cuts. We exploit a reform that abolished one part of German public DI and use unique data from a larger insurer. We document modest crowding-out effects of the reform, such that private DI take-up remains incomplete. We find no adverse selection in the private DI market. Instead, private DI tends to attract individuals with high income, high education, and low disability risk. Using a revealed preference approach, we estimate individual insurance valuations. Our welfare analysis finds that partial DI provision via the voluntary private market can improve welfare. However, distributional concerns may justify a full public DI mandate.

Welfare Effects of Property Taxation

Co-Author: Max Löffler

We investigate the welfare implications of property taxation. We apply a sufficient statistics approach that accounts for the distributional effects of tax changes at the household level within a spatial equilibrium framework. We show that equity effects are driven by price adjustments in the housing and labor markets, while efficiency is determined by changes in public goods. Using microdata and exploiting 5,500 municipal property tax changes in Germany, where assessed housing values remain constant, we find that 83 percent of the tax burden is passed through to rental prices, with modest labor market effects. Simulations of the welfare effects of property taxes reveal that the price effects of property tax hikes are regressive. Despite low efficiency costs of the tax, it becomes distributionally neutral only if public good preferences are very high.