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Financial work incentives for disability benefit recipients: Lessons from a randomized field experiment

  • Buetler, Monika

    ()

  • Lechner, Michael

    ()

  • Thiemann, Petra

    ()

  • Deuchert, Eva

    ()

  • Staubli, Stefan

    ()

Disability insurance (DI) beneficiaries lose some of their benefits if their earnings exceed certain thresholds (“cash-cliffs”). When this reduction is too high, this implicit taxation of earnings is considered to be one of the prime reasons for the low outflow from DI. This paper analyzes a conditional cash program that incentivizes work related reductions of disability benefits in Switzerland. A randomized group of DI beneficiaries receive the offer to claim a payment of up to CHF 72,000 (USD 71,000) if they take up or expand employment and reduce DI claims. This paper presents the results of the short-term evaluation by analyzing the first reactions to the announcement of seed capital. Overall, the interest in taking-up the financial incentive is low at only 3%. Individuals close to cash-cliffs react more on seed capital but the overall magnitude is small. Our results suggest that work-disincentives imposed by cash-cliffs are unlikely to be the main driver for low employment and outflow from the Swiss disability insurance system, despite the fact that the partial disability insurance system generates a non-linear budget set and bunching behavior at cash-cliffs prior to the implementation of seed capital.

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File URL: http://www1.vwa.unisg.ch/RePEc/usg/econwp/EWP-1406.pdf
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Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1406.

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Length: 33 pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:usg:econwp:2014:06
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  1. Kapteyn, Arie & Smith, James P. & van Soest, Arthur, 2009. "Work Disability, Work, and Justification Bias in Europe and the U.S," IZA Discussion Papers 4388, Institute for the Study of Labor (IZA).
  2. Monika Bütler & Lukas Inderbitzin & Jonathan F. Schulz & Stefan Staubli, 2012. "Die Auswirkungen bedarfsabhängiger Leistungen: Ergänzungsleistungen in der Schweiz," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 13(3), pages 179-195, 08.
  3. David Stapleton Gina Livermore Criag Thornton Bonnie ODay Robert R Weathers II Krista Harrison So ONeil Emily Sama Martin David Wittenburg Debra Wright, 2008. "Ticket to Work at the Crossroads A Solid Foundation with an Uncertain Future," Mathematica Policy Research Reports 700b9069e84340a3a705d1509, Mathematica Policy Research.
  4. David H. Autor & Mark G. Duggan, 2007. "Distinguishing Income from Substitution Effects in Disability Insurance," American Economic Review, American Economic Association, vol. 97(2), pages 119-124, May.
  5. Emmanuel Saez, 2010. "Do Taxpayers Bunch at Kink Points?," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 180-212, August.
  6. Frank, Richard G. & Lamiraud, Karine, 2009. "Choice, price competition and complexity in markets for health insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 550-562, August.
  7. Andreas Ravndal Kostøl & Magne Mogstad, 2013. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work," NBER Working Papers 19016, National Bureau of Economic Research, Inc.
  8. Hamish Low & Luigi Pistaferri, 2010. "Disability risk, disability insurance and life cycle behavior," IFS Working Papers W10/11, Institute for Fiscal Studies.
  9. Olivier Marie & Judit Vall Castello, 2011. "Measuring the (Income) Effect of Disability Insurance Generosity on Labour Market Participation," CEP Discussion Papers dp1094, Centre for Economic Performance, LSE.
  10. repec:mpr:mprres:4739 is not listed on IDEAS
  11. Campolieti, Michele & Riddell, Chris, 2012. "Disability policy and the labor market: Evidence from a natural experiment in Canada, 1998–2006," Journal of Public Economics, Elsevier, vol. 96(3), pages 306-316.
  12. repec:mpr:mprres:3883 is not listed on IDEAS
  13. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
  14. Beshears, John Leonard & Choi, James J. & Laibson, David I. & Madrian, Brigitte, 2008. "How Are Preferences Revealed?," Scholarly Articles 11130523, Harvard University Department of Economics.
  15. Annemiek van Vuren & Daniel van Vuuren, 2005. "Financial incentives in disability insurance in the Netherlands," CPB Discussion Paper 45, CPB Netherlands Bureau for Economic Policy Analysis.
  16. de Jong, Philip & Lindeboom, Maarten & van der Klaauw, Bas, 2006. "Screening disability insurance applications," Working Paper Series 2006:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  17. David Stapleton Gina Livermore edited by Craig Thornton Bonnie ODay Robert R Weathers II Krista Harrison So ONeil Emily Sama Martin David Wittenburg Debra Wright, 2008. "Ticket to Work at the Crossroads A Solid Foundation with an Uncertain Future," Mathematica Policy Research Reports 1168edda51a747edbc836f517, Mathematica Policy Research.
  18. Robert R. Weathers II & Jeffrey Hemmeter, 2011. "The impact of changing financial work incentives on the earnings of Social Security Disability Insurance (SSDI) beneficiaries," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 30(4), pages 708-728, 09.
  19. repec:mpr:mprres:4154 is not listed on IDEAS
  20. repec:mpr:mprres:6153 is not listed on IDEAS
  21. Staubli, Stefan, 2011. "The impact of stricter criteria for disability insurance on labor force participation," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1223-1235, October.
  22. Michele Campolieti, 2004. "Disability Insurance Benefits and Labor Supply: Some Additional Evidence," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 863-890, October.
  23. repec:mpr:mprres:6135 is not listed on IDEAS
  24. Craig Thornton & Gina Livermore & David Stapleton & John Kregel & Tim Silva & Bonnie O'Day & Thomas Fraker & W. Grant Revell & Jr. & Heather Schroeder & Meredith Edwards, 2004. "Evaluation of the Ticket to Work Program Initial Evaluation Report," Mathematica Policy Research Reports 8c1605c49dfc43dfa0d23dce4, Mathematica Policy Research.
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