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The Decentralization of Social Assistance and the Rise of Disability Insurance Enrolment

Author

Listed:
  • Gijs Roelofs

    () (CPB
    Ministry of Social Affairs and Employment)

  • Daniel Vuuren

    () (CPB and Netspar)

Abstract

Fiscal decentralization, the decentralization of government expenditures to local governments, may enhance public sector efficiency. Vertical externalities, i.e. spillovers between local and central government, could however undo part of this advantage. In this paper we estimate spillovers from Social Assistance (SA), administered by municipalities, towards central government’s Social Security Disability Insurance (SSDI) scheme in The Netherlands. The latter scheme saw rapidly rising enrolment rates after financial responsibility for Social Assistance was transferred from central to local government. We find that the correlation between local SSDI enrolment and the local stock of SA benefits recipients has increased significantly in the years after decentralization. We show that an increased caseload shifting from Social Assistance to Disability Insurance is the only plausible explanation for this change. Our analysis shows that, following the decentralization of Social Assistance, at least one third of the SSDI inflow was diverted from SA. This caseload shifting increased more rapidly in municipalities experiencing deficits on their SA budgets than in municipalities running a surplus.

Suggested Citation

  • Gijs Roelofs & Daniel Vuuren, 2017. "The Decentralization of Social Assistance and the Rise of Disability Insurance Enrolment," De Economist, Springer, vol. 165(1), pages 1-21, March.
  • Handle: RePEc:kap:decono:v:165:y:2017:i:1:d:10.1007_s10645-017-9289-4
    DOI: 10.1007/s10645-017-9289-4
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    More about this item

    Keywords

    Fiscal decentralization; Vertical externalities; Social assistance; Disability insurance;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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