Does Experience Rating Reduce Disability Inflow?

VATT Working Papers 46

40 Pages Posted: 11 Jul 2013

See all articles by Tomi Kyyrä

Tomi Kyyrä

VATT Institute for Economic Research

Juha Tuomala

Government of the Republic of Finland - VATT Institute for Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: April 25, 2013

Abstract

This study explores whether the experience rating of employers' disability insurance premiums affects the inflow of older employees to disability benefits in Finland. To identify the causal effect of experience rating, we exploit a pension reform that extended the coverage of the experience-rated premiums. The results show that a new disability benefit claim can cause substantial cost to the former employer through an increased premium. Nonetheless, we find no evidence of the significant effects of experience rating on the disability inflow. The lack of the behavioral effects may be due to the complexity of experience rating calculations and/or limited employer awareness.

Keywords: experience rating, disability insurance, early retirement

JEL Classification: H320, J160, J140

Suggested Citation

Kyyrä, Tomi and Tuomala, Juha, Does Experience Rating Reduce Disability Inflow? (April 25, 2013). VATT Working Papers 46, Available at SSRN: https://ssrn.com/abstract=2284656 or http://dx.doi.org/10.2139/ssrn.2284656

Tomi Kyyrä (Contact Author)

VATT Institute for Economic Research ( email )

Arkadiankatu 7
Helsinki, 00101
Finland
+3583045542 (Phone)

HOME PAGE: http://www.vatt.fi

Juha Tuomala

Government of the Republic of Finland - VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

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