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Using a Kinked Policy Rule to Estimate the Effect of Experience Rating on Disability Inflow

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  • Kyyrä, Tomi
  • Paukkeri, Tuuli

Abstract

We study whether the experience rating of employers’ disability insurance premiums affects the inflow to disability benefits in Finland. To identify the causal effect of experience rating, we exploit “kinks†in the rule that specifies the degree of experience rating as a function of firm size. Using comprehensive matched employer-employee panel data, we estimate the effects of experience rating on the inflow to sickness and disability benefits. Our results suggest that experience rating has reduced the disability inflow among men under age 50. For other groups we find no significant effects, yet we cannot rule out relatively small effects.

Suggested Citation

  • Kyyrä, Tomi & Paukkeri, Tuuli, 2018. "Using a Kinked Policy Rule to Estimate the Effect of Experience Rating on Disability Inflow," Working Papers 105, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:105
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    References listed on IDEAS

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    1. John W. Ruser, 1985. "Workers' Compensation Insurance, Experience-Rating, and Occupational Injuries," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 487-503, Winter.
    2. Petri Bockerman & Ohto Kanninen & Ilpo Suoniemi, 2014. "A Kink that Makes you Sick: the Effect of Sick Pay on Absence in a Social Insurance System," Discussion Papers 97, Aboa Centre for Economics.
    3. repec:aei:rpbook:24945 is not listed on IDEAS
    4. de Groot, Nynke & Koning, Pierre, 2016. "Assessing the effects of disability insurance experience rating. The case of The Netherlands," Labour Economics, Elsevier, vol. 41(C), pages 304-317.
    5. David Card & David S. Lee & Zhuan Pei & Andrea Weber, 2015. "Inference on Causal Effects in a Generalized Regression Kink Design," Econometrica, Econometric Society, vol. 83, pages 2453-2483, November.
    6. David H. Autor, 2015. "The unsustainable rise of the disability rolls in the United States: causes, consequences and policy options," Chapters, in: John Karl Scholz & Hyungypo Moon & Sang-Hyup Lee (ed.), Social Policies in an Age of Austerity, chapter 5, pages 107-136, Edward Elgar Publishing.
    7. Pierre Koning, 2009. "Experience Rating and the Inflow into Disability Insurance," De Economist, Springer, vol. 157(3), pages 315-335, September.
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    More about this item

    Keywords

    experience rating; disability insurance; early retirement; Social security; taxation and inequality; J14; J26; H32; Sosiaaliturva;
    All these keywords.

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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