Measuring the Value of Disability Insurance from Take-Up Decisions
Andreas Haller and Stefan Staubli
Working Paper #26
Retirement and Savings Institute – June 2026
We analyze the central trade-off in the design of Disability Insurance (DI) programs: providing insurance to people in need while maintaining incentives to work. To address this question, we develop a new revealed-preference approach to identify the insurance value of DI benefits. We show that comparing the DI take-up response to a change in benefits with the response to a change in wages makes it possible to estimate this value. Applying this framework to Canada, we estimate that increasing DI benefits by $1 creates an additional disincentive cost of $0.60, while generating an insurance value of $2.20. These results suggest that DI benefits are not overly generous in the Canadian context.