The Effects of Disability Allowance on the Economic Well-Being of Recipients Measured As Consumption

Background: The disability allowance (DA) was reformed in 2010 and has been in effect for more than 10 years. The main purpose of the program is to reduce the burden of additional costs due to disability for the disabled and their families in mild conditions. In 2023, the benefit increased up to KRW 60,000 per month and those with mild disabilities, receiving the public assistance program called the National Basic Livelihood benefit, are mainly eligible. The program covers additional costs due to disability or can lead to a variety of consumption (non-consumption expenditures, consumption of food, water & heating, housing, health-care, transportation, and communication, etc.). However, there are few studies that have attempted to identify whether the DA leads to additional consumption due to disability. In this study we examine whether the DA has contributed ton increasing recipients’ consumption that is directly and indirectly associated with additional costs due to disability (expenses of health-care, transportation, education, etc.).

Methods: We used the Korean Social Welfare Panel data from the 12th wave surveyed in 2017) to the 14th wave (surveyed in 2019), which were not affected by COVID-19 pandemic. For analysis, we employed the fixed-effects model to causally identify the effects of disability allowance per se. The independent variable is the amount of DA, and the dependent variables are 12 types of consumption expenditure. Control variables include gender, age, marital status, education level, administrative division, employee status, log disposable income, and chronic disease.

Results: First, we found that the DA increased the consumption of health-care expenses, in particular, where living in rural areas rather than metropolitans. The estimate of the interaction between the DA and the consumption of health-care expenses coefficient was 4.70 and statistically significant. Second, We found that the DA increased the expenditures of food, housing, and telecommunication. Respectively, the estimates of the interaction between DA and consumption of food, housing, and telecommunication expenses coefficients was 2.94, 5.74, 0.81 and statistically significant.

Conclusions: Based on the evidence we found, we propose that the amount of DA should be increased. Although DA plays a crucial role in enhancing the economic well-being of individuals with mild disabilities by covering fixed expenses such as food, housing, and telecommunication, we found that only health-care expenses increased among the additional expenses due to disability. This means that the payment of DA was insufficient, leading to only necessary consumption for both living expenses and additional expenses due to disability. Second, it is necessary to secure health-care expenses and access to health-care for recipients living in relatively small cities. If recipients live in small cities, they have less access to medical care than metropolitans. Therefore, they are more likely to spend large medical bills after their health deteriorates.