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9/29/2004: Designing Optimal Disability Insurance: a Case for Asset Testing (National Bureau of Economic Research [NBER])
Excerpt: The paper analyzes an implementation of an optimal disability insurance system as a competitive equilibrium with taxes. The problem is modeled as a dynamic mechanism design problem in which disability is unobservable. We show that an asset-tested disability system in which a disability transfer is paid only if an agent has assets below a specified maximum implements the optimum.
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