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Disability Support Pension Recipients: Who Gets Off (and Stays Off) Payments?

  • Lixin Cai

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and IZA Bonn)

  • Ha Vu

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and IZA Bonn)

  • Roger Wilkins

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and IZA Bonn)

We use Centrelink payment records on Disability Support Pension (DSP) recipients over the period 1995 to 2002 to investigate individual transitions off the payment. Our analysis involves two distinct, but complementary, components. The first component, which can be represented as an ‘entry cohort’ analysis, investigates the factors associated with making a transition off DSP. The second component can be interpreted as an ‘exit cohort’ approach, whereby we examine the factors associated with sustaining an exit off all welfare payments, given that an individual has in fact made the transition from DSP to that state. Our findings are consistent with the existence of a close correspondence between disability benefit receipt and labour market outcomes: entry to DSP via unemployment benefits is associated with substantially reduced prospects of exiting DSP, while employment during the DSP spell is associated with not only an increased probability of exiting DSP, but also more success in staying off payments once an exit has been made. A further finding of our analysis is that persons who exit DSP due to take-up of employment have a relatively high rate of return to payments compared with persons who exit for other reasons, and indeed exhibit a high propensity to cycle off and on payments.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2006n18.

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Length: 52 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:iae:iaewps:wp2006n18
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
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  1. Halpern, Janice & Hausman, Jerry A., 1986. "Choice under uncertainty: A model of applications for the social security disability insurance program," Journal of Public Economics, Elsevier, vol. 31(2), pages 131-161, November.
  2. Lixin Cai & Bob Gregory, 2005. "Unemployment Duration and Inflows onto the Disability Support Pension Program: Evidence from FaCS LDS Data," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(3), pages 233-252, 09.
  3. Disney, Richard & Webb, Steven, 1991. "Why Are There So Many Long Term Sick in Britain?," Economic Journal, Royal Economic Society, vol. 101(405), pages 252-62, March.
  4. Buddelmeyer, Hielke, 2001. "Re-employment Dynamics of Disabled Workers," IZA Discussion Papers 269, Institute for the Study of Labor (IZA).
  5. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 40-62, Spring.
  6. Guyonne Kalb, 2002. "Estimation of Labour Supply Models for Four Separate Groups in the Australian Population," Melbourne Institute Working Paper Series wp2002n24, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  7. Jeff Borland, 2000. "Disaggregated Models of Unemployment in Australia," Melbourne Institute Working Paper Series wp2000n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  8. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  9. Lixin Cai & Robert G. Gregory, 2004. "The Labour Market Conditions, Applications and Grants of disability support Pension (DSP) in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(3), pages 374-394, September.
  10. 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.
  11. Jonathan S. Leonard, 1979. "The Social Security Disability Program and Labor Force Participation," NBER Working Papers 0392, National Bureau of Economic Research, Inc.
  12. Lixin Cai, 2006. "An Analysis Of Duration On The Disability Support Pension Program ," Australian Economic Papers, Wiley Blackwell, vol. 45(2), pages 106-126, 06.
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