The Policy Impacts Library
MVPF Explained
- What is the MVPF?
  The MVPF methodology allows decision makers to compare the impacts of different types of policies and identify policies that have the highest returns on investment.
  START HERE
- Using the MVPF
  See stylised and real world examples that demonstrates the MVPF methodology in action.
  LEARN TO USE
- MVPF Lessons
  Explore the MVPF’s five key findings by analyzing over 100 US policy changes.
  SEE THE LESSONS
- Questions About the MVPF
  Explore answers to the most commonly asked questions about the MVPF and its application to policy analysis.
  VIEW THE FAQS

Disability Insurance (DI) to Veterans

Introduction

The US Department of Veterans Affairs (VA) Disability Compensation (DC) program provides health and income to nearly four million military veterans who suffer disabilities connected to their military service.

Autor et al. (2016) study the impact of the VADC program on labor supply. Using a difference-in-differences design that takes advantage of a policy change in 2001 that expanded the medical eligibility criteria for a certain category of Vietnam War veterans, they find that an additional dollar of disability benefits leads to a reduction in mean earnings of 26 cents (Table 8, Panel D).

MVPF SUMMARY

_________

Hendren and Sprung-Keyser (2020) translate this into its implied fiscal externality by multiplying the reduction in earnings by the tax rate, which implies a fiscal externality of $0.05. This implies an MVPF of 1/(1.05) = 0.95 (95% CI [0.92, 0.98]).

MVPF = 1.0

$1.0 Net Cost

1.1 1.0

$1.0 WTP

1.0 MVPF

1.0 0.9

References

Autor, David H., Mark Duggan, Kyle Greenberg, and David S. Lyle (2016). “The Impact of Disability Benefits on Labor Supply: Evidence from the VA’s Disability Compensation Program.” American Economic Journal: Applied Economics, 8(3), 31-68. DOI: https://doi.org/10.1257/app.20150158

Hendren, Nathaniel and Ben Sprung-Keyser (2020). “A Unified Welfare Analysis of Government Policies.” The Quarterly Journal of Economics, 135(3): 1209–1318. DOI: https://doi.org/10.1093/qje/qjaa006

Policy Features

Category: Social Insurance
Sub-Category: DI/SSI
Beneficiary Type(s): Adults
Average Age: 53
Average Income: 32444
Country of Implementation: United States
Year of Implementation: 2001
Empirical Method: Difference in Differences
Research Type: Secondary
Peer Reviewed: Yes
MVPF Publication Link: academic.oup.com/qje/article/135/3/1209/5781614