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The decentralization of Social Assistance and the rise of Disability Insurance enrolment

  • Gijs Roelofs

    ()

  • Daniel van Vuuren

    ()

In this paper, we assess spillover effects of Social Assistance (SA) decentralization in the Netherlands, in particular towards (a centrally administered) Disability Insurance scheme (DI). DI enrolment has increased strongly since the decentralization of SA. Many economists and policymakers believe that fiscal decentralization, the decentralization of government expenditures to local governments, enhances public sector efficiency. Vertical externalities – i.e. spillovers between local and central government – may however undo part of this advantage. In this paper, we assess spillover effects of Social Assistance (SA) decentralization in the Netherlands, in particular towards (a centrally administered) Disability Insurance scheme (DI). DI enrolment strongly increased since the decentralization of SA. We find that the sensitivity of local DI enrolment with respect to the stock of local SA recipients has increased over time, given that we control for both observed and unobserved disability risk factors. IV estimates show that, since the decentralization of SA, at least one third of DI inflow was diverted from SA.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 185.

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Date of creation: Jul 2011
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Handle: RePEc:cpb:discus:185
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  1. Seabright, Paul, 1994. "Accountability and Decentralization in Government: An Incomplete Contracts Model," CEPR Discussion Papers 889, C.E.P.R. Discussion Papers.
  2. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
  3. Dan Black & Kermit Daniel & Seth Sanders, 2002. "The Impact of Economic Conditions on Participation in Disability Programs: Evidence from the Coal Boom and Bust," American Economic Review, American Economic Association, vol. 92(1), pages 27-50, March.
  4. Borghans, Lex & Gielen, Anne C. & Luttmer, Erzo F.P., 2010. "Social Support Substitution and the Earnings Rebound: Evidence from a Regression Discontinuity in Disability Insurance Reform," IZA Discussion Papers 5412, Institute for the Study of Labor (IZA).
  5. Ed Westerhout, 2001. "Disability Risk, Disability Benefits, and Equilibrium Unemployment," International Tax and Public Finance, Springer, vol. 8(3), pages 219-244, May.
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  7. Lockwood, Ben, 1998. "Distributive Politics and the Costs of Centralization," CEPR Discussion Papers 2046, C.E.P.R. Discussion Papers.
  8. Timothy Besley & Michael Smart, 2005. "Fiscal Restraints and Voter Welfare," STICERD - Political Economy and Public Policy Paper Series 06, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  9. Barankay, Iwan & Lockwood, Ben, 2006. "Decentralization and the Productive Efficiency of Government: Evidence from Swiss Cantons," CEPR Discussion Papers 5639, C.E.P.R. Discussion Papers.
  10. Michael Keen, 1997. "Vertical Tax Externalities in the Theory of Fiscal Federalism," IMF Working Papers 97/173, International Monetary Fund.
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  12. Timothy Besley & Anne Case, 1992. "Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition," NBER Working Papers 4041, National Bureau of Economic Research, Inc.
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  14. Antonio Estache & J. Cremer & Paul Seabright, 1996. "Decentralizing Public Services: What can we learn from the Theory of the Firm?," ULB Institutional Repository 2013/44016, ULB -- Universite Libre de Bruxelles.
  15. 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, vol. 118(1), pages 157-205, February.
  16. Ehtisham Ahmad & Giorgio Brosio & Vito Tanzi, 2008. "Local Service Provision in Selected Oecd Countries; Do Decentralized Operations Work Better?," IMF Working Papers 08/67, International Monetary Fund.
  17. Frits Bos, 2010. "Fiscal decentralisation in the Netherlands: History, current practice and economic theory," CPB Document 214, CPB Netherlands Bureau for Economic Policy Analysis.
  18. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
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