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Selective Exercise of Discretion in Disability Insurance Awards

Author

Listed:
  • Garcia-Gomez, Pilar

    (Erasmus University Rotterdam)

  • Koning, Pierre

    (Vrije Universiteit Amsterdam)

  • O'Donnell, Owen

    (Erasmus University Rotterdam)

  • Herl, Carlos Riumallo

    (Erasmus University Rotterdam)

Abstract

Variation in assessor stringency in awarding benefits leaves applicants exposed to uninsured risk that could be systematic if discretion were exercised selectively. We test for this using administrative data on applications to the Dutch disability insurance program. We find that discretion is more often exercised in favor of lower-waged applicants. Pre-disability wages drop discontinuously just above disability thresholds for entitlement to partial benefits. Assessors are more likely to discard the highest-paying algorithm-generated job matches that determine earnings capacity and entitlement when evaluating lower-waged applicants. While these applicants benefit on average, they are exposed to greater risk from between assessor variation.

Suggested Citation

  • Garcia-Gomez, Pilar & Koning, Pierre & O'Donnell, Owen & Herl, Carlos Riumallo, 2023. "Selective Exercise of Discretion in Disability Insurance Awards," IZA Discussion Papers 15928, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp15928
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    Keywords

    disability insurance; screening;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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