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Disability policy and the labor market: Evidence from a natural experiment in Canada, 1998–2006

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  • Campolieti, Michele
  • Riddell, Chris

Abstract

This paper examines the effect of changes in two key parameters in disability policy: a) the earnings that disability insurance beneficiaries are allowed to earn without losing their disability benefits; and b) automatic reinstatement where beneficiaries can have benefits reinstated without re-application, and re-testing for disability determination. We examine the effects of these policy changes on the probability of employment for disability beneficiaries as well as the flows onto and off the disability rolls. We obtain our estimates using a difference-in-difference strategy that exploits the unique structure of disability insurance arrangements in Canada, namely that there are two programs: one that covers individuals in the province of Quebec, and one in the rest of Canada. Our preferred estimates indicate that the introduction of the allowable earnings change increased the propensity of disability beneficiaries to work, but we do not find that the earnings exemption had an effect on the flows on to or off the disability rolls. In contrast, we find that the introduction of the automatic reinstatement policy did not have an effect on any of the outcomes we examine.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 96 (2012)
Issue (Month): 3 ()
Pages: 306-316

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Handle: RePEc:eee:pubeco:v:96:y:2012:i:3:p:306-316

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Disability insurance; Earnings disregard; Automatic reinstatement; Employment; Entering disability rolls; Exiting disability rolls;

References

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  1. Daron Acemoglu & Joshua D. Angrist, 2001. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 915-957, October.
  2. Stephen G. Donald & Kevin Lang, 2007. "Inference with Difference-in-Differences and Other Panel Data," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 221-233, May.
  3. Thomas Lemieux & David Card, 1998. "Education, Earnings, and the "Canadian G.I. Bill"," NBER Working Papers 6718, National Bureau of Economic Research, Inc.
  4. Baker, Michael & Benjamin, Dwayne, 1999. "How do retirement tests affect the labour supply of older men?," Journal of Public Economics, Elsevier, vol. 71(1), pages 27-51, January.
  5. W. Craig Riddell, 2005. "Why Is Canada's Unemployment Rate Persistently Higher than in the United States?," Canadian Public Policy, University of Toronto Press, vol. 31(1), pages 93-100, March.
  6. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
  7. John Bound & Richard Burkhauser & Austin Nichols, 2001. "Tracking the Household Income of SSDI and SSI Applicants," Working Papers wp009, University of Michigan, Michigan Retirement Research Center.
  8. Timothy Conley & Christopher Taber, 2005. "Inference with "Difference in Differences" with a Small Number of Policy Changes," NBER Technical Working Papers 0312, National Bureau of Economic Research, Inc.
  9. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  10. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
  11. Kevin Milligan, 2002. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," NBER Working Papers 8845, National Bureau of Economic Research, Inc.
  12. Hilary Williamson Hoynes & Robert Moffitt, 1997. "Tax Rates and Work Incentives in the Social Security Disability Insurance Program: Current Law and Alternative Reforms," NBER Working Papers 6058, National Bureau of Economic Research, Inc.
  13. Baker, Michael & Benjamin, Dwayne, 1999. "Early Retirement Provisions and the Labor Force Behavior of Older Men: Evidence from Canada," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 724-56, October.
  14. David H. Autor & Mark G. Duggan, 2003. "The Rise In The Disability Rolls And The Decline In Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 157-205, February.
  15. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  16. Michele Campolieti, 2011. "The ins and outs of unemployment in Canada, 1976-2008," Canadian Journal of Economics, Canadian Economics Association, vol. 44(4), pages 1331-1349, November.
  17. Michele Campolieti, 2004. "Disability Insurance Benefits and Labor Supply: Some Additional Evidence," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 863-890, October.
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Cited by:
  1. Andreas Ravndal Kostøl & Magne Mogstad, 2012. "How financial incentives induce disability insurance recipients to return to work," Discussion Papers 685, Research Department of Statistics Norway.
  2. Silva, José I. & Vall-Castello, Judit, 2012. "Evaluating the Impact of a Reduction in the Generosity of Disability Benefits: The 2008 Spanish Reform," IZA Discussion Papers 6482, Institute for the Study of Labor (IZA).

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