Earnings responses to disability insurance stringency

Abstract

Accurate assessment of earnings capacity is critical to the efficient operation of disability insurance (DI) programs. We use administrative data on the universe of Dutch DI recipients to estimate employment and earnings responses to reassessment of their earnings capacity under more stringent rules. We estimate that reassessment of recipients aged 30-44 removed 17 percent from the program and reduced benefit income by 20 percent, on average. In response, employment increased by 6.7 percentage points and earnings rose by 18 percent. Recipients were able to increase earnings by e636 for every e1000 reduction in DI benefit. This earnings response was strongest from those with more subjectively defined disabilities and a shorter claim duration, as well as younger and female recipients.

Workers’ Moral Hazard and Insurer Effort in Disability Insurance

“…recent overviews by Dal Bianco (2019), and Cabral & Dillender (2020). This line of research has shown that: more generous benefit conditions increase applications to an duration of disability (Cabral & Dillender, 2020;Autor et al, 2014;Gelber et al, 2017); DI receipt decreases labor supply and wage earnings (French & Song, 2014;Maestas et al, 2013;Garcia-Mandicó et al, 2020); and changes in benefit conditions a↵ect employment and earnings of benefit recipients (Gruber, 2000;Koning & Van Sonsbeek, 2017; Kostøl analysis confirms the general finding that more generous DI benefits decrease labor supply. Within the context of private supplementary insurance, however, our results…”

Workers' Moral Hazard and Insurer Effort in Disability Insurance

“…recent overviews by Dal Bianco (2019), and Cabral & Dillender (2020). This line of research has shown that: more generous benefit conditions increase applications to an duration of disability (Cabral & Dillender, 2020;Autor et al, 2014;Gelber et al, 2017); DI receipt decreases labor supply and wage earnings (French & Song, 2014;Maestas et al, 2013;Garcia-Mandicó et al, 2020); and changes in benefit conditions a↵ect employment and earnings of benefit recipients (Gruber, 2000;Koning & Van Sonsbeek, 2017; Kostøl analysis confirms the general finding that more generous DI benefits decrease labor supply. Within the context of private supplementary insurance, however, our results…”

Take-Up and Labor Supply Responses to Disability Insurance Earnings Limits

“…However, other types of fiscal externalities can also fit into this framework. For example, time out of the labor force while receiving benefits may reduce working capacity (Autor, Maestas, Mullen and Strand, 2015;Garcia-Mandicó, García-Gómez, Gielen and O'Donnell, 2020;Bíró et al, 2022) which imposes an additional negative fiscal externality.…”