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Employers Opting Out of Public Disability Insurance: Selection or Incentive Effects?

Author

Listed:
  • Hassink, Wolter

    () (Utrecht University)

  • Koning, Pierre

    () (Leiden University)

  • Zwinkels, Wim

    () (affiliation not available)

Abstract

This paper analyzes selection and incentive effects of opting out from public to private insurance on employer Disability Insurance (DI) inflow rates. We use administrative information on DI benefit costs and opting-out decisions of a balanced panel of about 140,000 employers that are observed between 2007 and 2011. We argue that the opting-out decision of employers was driven by current DI enrolment and anticipation effects that resulted from short-term expectations on DI costs. In particular, employers opted out when this was most rewarding for them in reducing DI premium rates. When controlling for these effects, our main finding is that there are no incentive effects due to opting out. Thus, publicly and privately insured employers show similar DI inflow rates.

Suggested Citation

  • Hassink, Wolter & Koning, Pierre & Zwinkels, Wim, 2015. "Employers Opting Out of Public Disability Insurance: Selection or Incentive Effects?," IZA Discussion Papers 9181, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9181
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    References listed on IDEAS

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    1. Alma Cohen & Peter Siegelman, 2010. "Testing for Adverse Selection in Insurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 39-84.
    2. David H. Autor & Mark G. Duggan, 2006. "The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 71-96, Summer.
    3. Richard Burkhauser & Mary Daly & Duncan McVicar & Roger Wilkins, 2014. "Disability benefit growth and disability reform in the US: lessons from other OECD nations," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-30, December.
    4. Pierre Koning & Maarten Lindeboom, 2015. "The Rise and Fall of Disability Insurance Enrollment in the Netherlands," Journal of Economic Perspectives, American Economic Association, vol. 29(2), pages 151-172, Spring.
    5. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, March.
    6. Parsons, Donald O, 1991. "Self-Screening in Targeted Public Transfer Programs," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 859-876, August.
    7. Kyyrä, Tomi & Tuomala, Juha, 2013. "Does Experience Rating Reduce Disability Inflow?," IZA Discussion Papers 7344, Institute for the Study of Labor (IZA).
    8. Pierre Koning, 2009. "Experience Rating and the Inflow into Disability Insurance," De Economist, Springer, vol. 157(3), pages 315-335, September.
    9. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
    10. David Autor & Mark Duggan & Jonathan Gruber, 2014. "Moral Hazard and Claims Deterrence in Private Disability Insurance," American Economic Journal: Applied Economics, American Economic Association, vol. 6(4), pages 110-141, October.
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    Cited by:

    1. 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.
    2. Pierre Koning, 2016. "Privatizing sick pay: Does it work?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 324-324, December.

    More about this item

    Keywords

    public versus private insurance; disability insurance; opting out; longitudinal analyses;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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