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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.

Suggested Citation

  • Campolieti, Michele & Riddell, Chris, 2012. "Disability policy and the labor market: Evidence from a natural experiment in Canada, 1998–2006," Journal of Public Economics, Elsevier, vol. 96(3), pages 306-316.
  • Handle: RePEc:eee:pubeco:v:96:y:2012:i:3:p:306-316
    DOI: 10.1016/j.jpubeco.2011.09.001
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    References listed on IDEAS

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    11. 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.
    12. 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.
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    14. 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.
    15. 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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    Citations

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    Cited by:

    1. Gordon B. Dahl & Andreas Ravndal Kostøl & Magne Mogstad, 2014. "Family Welfare Cultures," The Quarterly Journal of Economics, Oxford University Press, vol. 129(4), pages 1711-1752.
    2. Michele Campolieti & Morley Gunderson & Jeffrey Smith, 2014. "The effect of vocational rehabilitation on the employment outcomes of disability insurance beneficiaries: new evidence from Canada," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-29, December.
    3. Andreas Ravndal Kostol & Magne Mogstad, 2014. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work," American Economic Review, American Economic Association, vol. 104(2), pages 624-655, February.
    4. Moore, Timothy J., 2015. "The employment effects of terminating disability benefits," Journal of Public Economics, Elsevier, vol. 124(C), pages 30-43.
    5. Koning, Pierre & van Sonsbeek, Jan-Maarten, 2017. "Making disability work? The effects of financial incentives on partially disabled workers," Labour Economics, Elsevier, vol. 47(C), pages 202-215.
    6. Thomas Barnay & Emmanuel Duguet & Christine Le Clainche & Yann Videau, 2016. "An evaluation of the 1987 French Disabled Workers Act: Better paying than hiring," Working Papers hal-01292132, HAL.
    7. repec:wfo:wstudy:47254 is not listed on IDEAS
    8. Gordon B. Dahl & Anne (A.C.) Gielen, 2018. "Intergenerational Spillovers in Disability Insurance," Tinbergen Institute Discussion Papers 18-015/V, Tinbergen Institute.
    9. Atsuko Tanaka & Hsuan-Chih (Luke) Lin & Ha Nguyen, "undated". "Removing Disability Insurance Coverage: The Effects on Work Incentive and Occupation Choice," Working Papers 2016-37, Department of Economics, University of Calgary, revised 10 Jul 2016.
    10. Eugster, Beatrix & Deuchert, Eva, 2017. "Income and Substitution Effects of a Disability Insurance Reform," Economics Working Paper Series 1709, University of St. Gallen, School of Economics and Political Science.
    11. Don Drummond & Evan Capeluck & Matthew Calver, 2015. "The Key Challenge for Canadian Public Policy: Generating Inclusive and Sustainable Economic Growth," CSLS Research Reports 2015-11, Centre for the Study of Living Standards.
    12. Monika Bütler & Eva Deuchert & Michael Lechner & Stefan Staubli & Petra Thiemann, 2015. "Financial work incentives for disability benefit recipients: lessons from a randomised field experiment," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-18, December.
    13. Kevin Milligan & Tammy Schirle, 2017. "Push and Pull: Disability Insurance, Regional Labor Markets, and Benefit Generosity in Canada and the United States," NBER Working Papers 23405, National Bureau of Economic Research, Inc.
    14. Alexander Gelber & Timothy J. Moore & Alexander Strand, 2017. "The Effect of Disability Insurance Payments on Beneficiaries' Earnings," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 229-261, August.
    15. Deuchert, E. & Eugster, B., 2016. "Crawling Up the Cash Cliff? Behavioral Responses to a Disability Insurance Reform," Health, Econometrics and Data Group (HEDG) Working Papers 16/21, HEDG, c/o Department of Economics, University of York.
    16. Andersson, Josefine, 2018. "Financial incentives to work for disability insurance recipients - Sweden’s special rules for continuous deduction," Working Paper Series 2018:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    17. Eva Frutos & Judit Castello, 2015. "Equal health, equal work? The role of disability benefits in employment after controlling for health status," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(3), pages 329-340, April.
    18. Liebert, Helge, 2015. "Medical Screening and Award Errors in Disability Insurance," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113224, Verein für Socialpolitik / German Economic Association.
    19. Liebert, H.;, 2018. "External Medical Review in the Disability Determination Process," Health, Econometrics and Data Group (HEDG) Working Papers 18/21, HEDG, c/o Department of Economics, University of York.
    20. 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).
    21. repec:wfo:wstudy:46830 is not listed on IDEAS
    22. Matthew J. Hill & Jose Silva & Judit Vall, 2015. "Act Now: The Effects of the 2008 Spanish Disability Reform," Studies in Economics 1512, School of Economics, University of Kent.

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