Evaluating Recent Crackdowns on Disability Benefits: Effects on Income and Health Care Use in Australia

Many developed countries have enacted reforms to reduce disability rolls. Using a 2014 reform to Australia’s disability program, we find that removal has an average zero effect on household income but increases prescriptions for antipsychotics. However, average effects mask heterogeneity. Removed recipients living with family experience no drop in income and no increase in antipsychotics. Removed recipients living alone experience a drop in income and an increase in antipsychotics. Using a welfare analysis with multiple adjustment margins, we find that behavioral adjustments offset the majority of private welfare loss for recipients living with family, but little for those living alone.