Getting Disabled Workers Back to Work: How Important are Economic Incentives?

32 Pages Posted: 19 Jan 2013

See all articles by Elisabeth Fevang

Elisabeth Fevang

University of Oslo - Ragnar Frisch Centre for Economic Research

Inés Hardoy

Institute for Social Research, Norway

Knut Roed

Ragnar Frisch Centre for Economic Research; IZA Institute of Labor Economics

Abstract

We investigate the impacts of economic incentives on the duration and outcome of temporary disability insurance (TDI) spells. The analysis is based on a large quasi-experiment in Norway, with a complete overhaul of the TDI benefit system. Our findings show that the labor supply of TDI claimants responds to both the benefit-level and to the level of local labor demand. The estimated elasticity of the employment hazard with respect to the benefit-level is – 0.3. We also find that the level of TDI benefits significantly affects the transition rate to alternative social insurance programs such as permanent disability and unemployment.

Keywords: temporary disability, rehabilitation, hazard rate models, labor supply

JEL Classification: H55, I38, J22

Suggested Citation

Fevang, Elisabeth and Hardoy, Inés and Røed, Knut, Getting Disabled Workers Back to Work: How Important are Economic Incentives?. IZA Discussion Paper No. 7137. Available at SSRN: https://ssrn.com/abstract=2203327

Elisabeth Fevang (Contact Author)

University of Oslo - Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0317 Oslo
Norway

Inés Hardoy

Institute for Social Research, Norway ( email )

Munthesgate 31
0260 Oslo
Norway

Knut Røed

Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0349 Oslo
Norway

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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