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, av-erage effects mask heterogeneity. Removed recipients living with family experience no drop in income and no increase in antipsychotics. Removed recipients living alone ex-perience a drop in income and an increase in antipsychotics. Using a welfare analysis with multiple adjustment margins, we find that behavioral adjustments offset the ma-jority of private welfare loss for recipients living with family, but little for those living alone.