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Disability Benefit Generosity and Labor Force Withdrawal

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  • Mullen, Kathleen

    () (RAND)

  • Staubli, Stefan

    () (University of Calgary)

Abstract

A key component for estimating the optimal size and structure of disability insurance (DI) programs is the elasticity of DI claiming with respect to benefit generosity. Yet, in many countries, including the United States, all workers face identical benefit schedules, which are a function of one's labor market history, making it difficult to separate the effect of the benefit level from the effect of unobserved preferences for work on individuals' claiming decisions. To circumvent this problem, we exploit exogenous variation in DI benefits in Austria arising from several reforms to its DI and old age pension system in the 1990s and 2000s. We use comprehensive administrative social security records data on the universe of Austrian workers to compute benefit levels under six different regimes, allowing us to identify and precisely estimate the elasticity of DI claiming with respect to benefit generosity. We find that, over this time period, a one percent increase in potential DI benefits was associated with a 1.2 percent increase in DI claiming.

Suggested Citation

  • Mullen, Kathleen & Staubli, Stefan, 2015. "Disability Benefit Generosity and Labor Force Withdrawal," IZA Discussion Papers 9549, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9549
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    References listed on IDEAS

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    1. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 395-427.
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    4. 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.
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    6. David Autor & Nicole Maestas & Kathleen Mullen & Alexander Strand, 2011. "Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants," Working Papers wp258, University of Michigan, Michigan Retirement Research Center.
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    8. Staubli, Stefan & Zweimüller, Josef, 2013. "Does raising the early retirement age increase employment of older workers?," Journal of Public Economics, Elsevier, vol. 108(C), pages 17-32.
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    11. Nicole Maestas & Kathleen J. Mullen & Alexander Strand, 2013. "Does Disability Insurance Receipt Discourage Work? Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt," American Economic Review, American Economic Association, vol. 103(5), pages 1797-1829, August.
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    Cited by:

    1. Dayanand S. Manoli & Andrea Weber, 2016. "The Effects of the Early Retirement Age on Retirement Decisions," NBER Working Papers 22561, National Bureau of Economic Research, Inc.
    2. repec:spr:joecin:v:16:y:2018:i:4:d:10.1007_s10888-018-9391-0 is not listed on IDEAS
    3. Joanna Tyrowicz & Krzysztof Makarski & Marcin Bielecki, 2018. "Inequality in an OLG economy with heterogeneous cohorts and pension systems," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(4), pages 583-606, December.
    4. Elisabeth Bublitz & Michael Wyrwich, 2018. "Technological change and labor market integration," Jena Economic Research Papers 2018-008, Friedrich-Schiller-University Jena.
    5. Philippe Ruh & Stefan Staubli, 2018. "Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design," NBER Working Papers 24830, National Bureau of Economic Research, Inc.
    6. Andreas Kuhn & Stefan Staubli & Jean-Philippe Wuellrich & Josef Zweimüller, 2018. "Fatal Attraction? Extended Unemployment Benefits, Labor Force Exits, and Mortality," NBER Working Papers 25124, National Bureau of Economic Research, Inc.
    7. repec:spr:italej:v:5:y:2019:i:1:d:10.1007_s40797-019-00086-z is not listed on IDEAS
    8. Richard V. Burkhauser & Mary C. Daly & Nicolas R. Ziebarth, 2016. "Protecting working-age people with disabilities: experiences of four industrialized nations
      [Absicherung von Personen mit Erwerbsminderung: Erfahrungen aus vier Industrieländern]
      ," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(4), pages 367-386, December.
    9. Bratsberg, Bernt & Raaum, Oddbjørn & Røed, Knut, 2018. "Immigrant Responses to Social Insurance Generosity," IZA Discussion Papers 11482, Institute of Labor Economics (IZA).
    10. Burkhauser, Richard V. & Daly, Mary C. & Ziebarth, Nicolas, 2016. "Protecting working-age people with disabilities : experiences of four industrialized nations (Absicherung von Personen mit Erwerbsminderung : Erfahrungen aus vier Industrieländern)," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 49(4), pages 367-386.

    More about this item

    Keywords

    disability insurance; benefit generosity; labor force withdrawal; claiming elasticity;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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