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Disability Benefit Generosity and Labor Force Withdrawal

Author

Listed:
  • Mullen, Kathleen

    (University of Oregon)

  • 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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    Cited by:

    1. Andreas Haller & Stefan Staubli & Josef Zweimüller, 2024. "Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits?," Econometrica, Econometric Society, vol. 92(1), pages 79-110, January.
    2. Hamish Low & Luigi Pistaferri, 2020. "Disability Insurance: Theoretical Trade‐Offs and Empirical Evidence," Fiscal Studies, John Wiley & Sons, vol. 41(1), pages 129-164, March.
    3. Seibold, Arthur & Seitz, Sebastian & Siegloch, Sebastian, 2022. "Privatizing Disability Insurance," CEPR Discussion Papers 17568, C.E.P.R. Discussion Papers.
    4. Alexander Ahammer & Analisa Packham, 2022. "Disability Insurance Screening and Worker Outcomes," Upjohn Working Papers 22-375, W.E. Upjohn Institute for Employment Research.
    5. 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.
    6. Philippe Ruh & Stefan Staubli, 2019. "Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design," American Economic Journal: Economic Policy, American Economic Association, vol. 11(2), pages 269-300, May.
    7. Kuhn, Andreas & Staubli, Stefan & Wuellrich, Jean-Philippe & Zweimüller, Josef, 2020. "Fatal attraction? Extended unemployment benefits, labor force exits, and mortality," Journal of Public Economics, Elsevier, vol. 191(C).
    8. Elisabeth Bublitz & Michael Wyrwich, 2018. "Technological change and labor market integration," Jena Economics Research Papers 2018-008, Friedrich-Schiller-University Jena.
    9. Myhre, Andreas, 2021. "Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs," MPRA Paper 109547, University Library of Munich, Germany.
    10. Franca Glenzer & Pierre-Carl Michaud & Stefan Staubli, 2023. "Frames, Incentives, and Education: Effectiveness of Interventions to Delay Public Pension Claiming," CIRANO Working Papers 2023s-05, CIRANO.
    11. Johnsen, Julian V. & Willén, Alexander, 2022. "The effect of negative income shocks on pensioners," Labour Economics, Elsevier, vol. 76(C).
    12. 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.
    13. 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.
    14. 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.
    15. Chiara Dal Bianco, 2023. "Disability Insurance and the Effects of Return-to-work Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 49, pages 351-373, July.
    16. Tunga Kantarcı & Jan‐Maarten van Sonsbeek & Yi Zhang, 2023. "The heterogeneous impact of stricter criteria for disability insurance," Health Economics, John Wiley & Sons, Ltd., vol. 32(9), pages 1898-1920, September.
    17. Simonetti, Irene & Belloni, Michele & Farina, Elena & Zantomio, Francesca, 2022. "Labour market institutions and long term adjustments to health shocks: Evidence from Italian administrative records," Labour Economics, Elsevier, vol. 79(C).
    18. Bratsberg, Bernt & Raaum, Oddbjørn & Røed, Knut, 2020. "Immigrant Responses to Social Insurance Generosity," Labour Economics, Elsevier, vol. 65(C).
    19. 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.
    20. Chiara Dal Bianco, 2019. "Labour Supply and Welfare Effects of Disability Insurance: A Survey," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 5(1), pages 161-189, March.
    21. Bjørneby, Marie & Markussen, Simen & Røed, Knut, 2020. "Does the Wealth Tax Kill Jobs?," IZA Discussion Papers 13766, Institute of Labor Economics (IZA).
    22. Marie Bjørneby & Simen Markussen & Knut Røed, 2023. "An imperfect wealth tax and employment in closely held firms," Economica, London School of Economics and Political Science, vol. 90(358), pages 557-583, April.
    23. Zantomio, Francesca & Belloni, Michele & Carrieri, Vincenzo & Farina, Elena & Simonetti, Irene, 2024. "Behavioural Responses to Disability Insurance Generosity in a Work-Compatibility Setting," IZA Discussion Papers 16819, Institute of Labor Economics (IZA).
    24. Mario Bernasconi & Tunga Kantarcı & Arthur Soest & Jan-Maarten Sonsbeek, 2024. "The added worker effect: evidence from a disability insurance reform," Review of Economics of the Household, Springer, vol. 22(4), pages 1275-1316, December.

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    More about this item

    Keywords

    disability insurance; benefit generosity; labor force withdrawal; claiming elasticity;
    All these keywords.

    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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