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Tightening the Purse Strings: The Effect of Stricter DI Eligibility Criteria on Labor Supply

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  • Stefan Staubli

Abstract

This paper explores the labor supply effects of a large-scale policy change in the Austrian disability insurance program, which tightened eligibility criteria for men above a certain age. Using administrative data on the universe of Austrian private-sector employees, the results of difference-in-difference type regressions suggest a substantial and statistically significant decline in disability enrollment of 5-5.7 percentage points and a modest increase in employment of 1.4 to 2.7 percentage points. On the other hand, the policy change had important spillover effects into the unemployment and sickness insurance program. Specifically, the share of individuals receiving unemployment benefits increased roughly by 3 percentage points and the share receiving sickness insurance benefits by 0.6 percentage points.

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Bibliographic Info

Paper provided by The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria in its series NRN working papers with number 2009-30.

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Length: 43 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:jku:nrnwps:2009_30

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Postal: NRN Labor Economics and the Welfare State, c/o Rudolf Winter-Ebmer, Altenbergerstr. 69, 4040 Linz
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Web page: http://www.labornrn.at/
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Keywords: Disability Insurance; Eligibility Criteria; Labor Supply; Policy Reform;

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References

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  1. Lucie Schmidt & Purvi Sevak, 2004. "AFDC, SSI, and Welfare Reform Aggressiveness: Caseload Reductions versus Caseload Shifting," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
  2. Duggan, Mark & Singleton, Perry & Song, Jae, 2007. "Aching to retire? The rise in the full retirement age and its impact on the social security disability rolls," Journal of Public Economics, Elsevier, Elsevier, vol. 91(7-8), pages 1327-1350, August.
  3. Lucie Schmidt & Purvi Sevak, 2000. "AFDC, SSI, and Welfare Reform Aggressiveness: Caseload Reductions vs. Caseload Shifting," Department of Economics Working Papers, Department of Economics, Williams College 2002-03, Department of Economics, Williams College.
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  10. Jonathan Gruber, 1996. "Disability Insurance Benefits and Labor Supply," NBER Working Papers 5866, National Bureau of Economic Research, Inc.
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  12. de Jong, Philip & Lindeboom, Maarten & van der Klaauw, Bas, 2006. "Screening Disability Insurance Applications," IZA Discussion Papers 1981, Institute for the Study of Labor (IZA).
  13. Karlström, Anders & Palme, Mårten & Svensson, Ingemar, 2008. "The Employment Effect of Stricter Rules for Eligibility for DI: Evidence from a Natural Experiment in Sweden," Research Papers in Economics, Stockholm University, Department of Economics 2008:3, Stockholm University, Department of Economics.
  14. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
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    • Josef Zweimüller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon Büchi, 2009. "Austrian social security database," IEW - Working Papers 410, Institute for Empirical Research in Economics - University of Zurich.
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  20. repec:crr:crrwps:2002-07 is not listed on IDEAS
  21. Parsons, Donald O, 1991. "The Health and Earnings of Rejected Disability Insurance Applicants: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 81(5), pages 1419-26, December.
  22. Burtless, Gary, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(5), pages 781-805, October.
  23. David H. Autor & Mark G. Duggan, 2006. "The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 20(3), pages 71-96, Summer.
  24. Gruber, Jonathan & Kubik, Jeffrey D., 1997. "Disability insurance rejection rates and the labor supply of older workers," Journal of Public Economics, Elsevier, Elsevier, vol. 64(1), pages 1-23, April.
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