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Earnings responses to disability insurance stringency

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  • Garcia-Mandicó, Sílvia
  • García-Gómez, Pilar
  • Gielen, Anne C.
  • O’Donnell, Owen

Abstract

Accurate assessment of earnings capacity is critical to the efficient operation of disability insurance (DI) programs. We use administrative data on the universe of Dutch DI recipients to estimate employment and earnings responses to reassessment of their earnings capacity under more stringent rules. We estimate that reassessment of recipients aged 30–44 removed 17 percent from the program and reduced benefit income by 20 percent, on average. In response, employment increased by 6.7 percentage points and earnings rose by 18 percent. Recipients were able to increase earnings by € 636 for every € 1000 reduction in DI benefit. This earnings response was strongest from those with more subjectively defined disabilities and a shorter claim duration, as well as younger and female recipients.

Suggested Citation

  • Garcia-Mandicó, Sílvia & García-Gómez, Pilar & Gielen, Anne C. & O’Donnell, Owen, 2020. "Earnings responses to disability insurance stringency," Labour Economics, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:labeco:v:66:y:2020:i:c:s0927537120300841
    DOI: 10.1016/j.labeco.2020.101880
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    Cited by:

    1. Koning, Pierre & van Lent, Max, 2022. "Workers' Moral Hazard and Insurer Effort in Disability Insurance," IZA Discussion Papers 15164, Institute of Labor Economics (IZA).
    2. Zaresani, Arezou & Olivo-Villabrille, Miguel, 2022. "Return-to-work policies’ clawback regime and labor supply in disability insurance programs," Labour Economics, Elsevier, vol. 78(C).
    3. Koning, Pierre & Muller, Paul & Prudon, Roger, 2022. "Do disability benefits hinder work resumption after recovery?," Journal of Health Economics, Elsevier, vol. 82(C).
    4. Anikó Bíró & Cecília Hornok & Judit Krekó & Dániel Prinz & Ágota Scharle, 2023. "The labor market effects of disability benefit loss," IFS Working Papers W23/27, Institute for Fiscal Studies.

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    More about this item

    Keywords

    Disability insurance; Health; Employment; Earnings;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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