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Hidden unemployment in disability insurance in the Netherlands; an empirical analysis based on employer data

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  • Pierre Koning

    ()

  • Daniel van Vuuren

    ()

Abstract

In this paper, we construct and estimate a (semi-) structural model, so as to uncover the fraction of hidden unemployment in the Disability Insurance (DI) enrolment rate. For this purpose, we use longitudinal administrative data of Dutch employers for 1994-2003. We find the (average) fraction of hidden unemployment in DI enrolment to amount to about 11%. This corresponds to 2.6% of the ‘true’ unemployment insurance (UI) enrolment rate of employers. Over the years, we observe a strong decrease in this fraction, from 5.4% in 1995, to 0.7% in 2003. In addition, our estimates suggest that most of correlation that is observed between the UI and DI enrolment rates can be explained by substitution effects, and not by ‘true’ correlation between the schemes that is exogenous to the firm. In the model, the fraction of hidden unemployment in the DI scheme is (over-)identified from various restrictions imposed by the data. First, identification follows from exclusion restrictions obtained from the coefficient estimates of variables that are assumed to influence the UI enrolment rate only. For this purpose, we use information on the wage distribution of workers employed at the firms in our sample, and sectoral growth rates. Second, identification of substitution effects follows from the observed correlation between both enrolment rates.

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 69.

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Date of creation: Aug 2006
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Handle: RePEc:cpb:discus:69

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  1. Regina Riphahn, 1997. "Disability retirement and unemployment - substitute pathways for labour force exit? An empirical test for the case of Germany," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 29(5), pages 551-561.
  2. Arie Kapteyn & Klaas de Vos, 1999. "Social Security and Retirement in the Netherlands," NBER Chapters, National Bureau of Economic Research, Inc, in: Social Security and Retirement around the World, pages 269-303 National Bureau of Economic Research, Inc.
  3. Arjan Heyma, 2004. "A structural dynamic analysis of retirement behaviour in the Netherlands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(6), pages 739-759.
  4. Hassink, R. & Ours, J.C. van & Ridder, G., 1997. "Dismissal through disability," Open Access publications from Tilburg University urn:nbn:nl:ui:12-86871, Tilburg University.
  5. Annemiek van Vuren & Daniel van Vuuren, 2005. "Financial incentives in disability insurance in the Netherlands," CPB Discussion Paper, CPB Netherlands Bureau for Economic Policy Analysis 45, CPB Netherlands Bureau for Economic Policy Analysis.
  6. 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, MIT Press, vol. 118(1), pages 157-205, February.
  7. Zabel, Jeffrey E., 1992. "Estimating fixed and random effects models with selectivity," Economics Letters, Elsevier, Elsevier, vol. 40(3), pages 269-272, November.
  8. Kalwij, Adriaan S., 2003. "A maximum likelihood estimator based on first differences for a panel data Tobit model with individual specific effects," Economics Letters, Elsevier, Elsevier, vol. 81(2), pages 165-172, November.
  9. Pierre Koning & Daniel van Vuuren, 2006. "Disability insurance and unemployment insurance as substitute pathways," CPB Discussion Paper, CPB Netherlands Bureau for Economic Policy Analysis 70, CPB Netherlands Bureau for Economic Policy Analysis.
  10. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, Elsevier, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392 Elsevier.
  11. Pierre Koning, 2004. "Estimating the impact of experience rating on the inflow into disability insurance in the Netherlands," CPB Discussion Paper, CPB Netherlands Bureau for Economic Policy Analysis 37, CPB Netherlands Bureau for Economic Policy Analysis.
  12. Honore, Bo E, 1992. "Trimmed LAD and Least Squares Estimation of Truncated and Censored Regression Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 60(3), pages 533-65, May.
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Cited by:
  1. Pierre Koning & Daniel van Vuuren, 2006. "Disability insurance and unemployment insurance as substitute pathways," CPB Discussion Paper, CPB Netherlands Bureau for Economic Policy Analysis 70, CPB Netherlands Bureau for Economic Policy Analysis.

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