Disability Benefit Generosity and Labor Force Withdrawal

48 Pages Posted: 26 Dec 2015

See all articles by Kathleen J. Mullen

Kathleen J. Mullen

RAND Corporation

Stefan Staubli

University of Zurich; RAND Corporation - Labor and Population; Netspar

Multiple version iconThere are 3 versions of this paper

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.

Keywords: disability insurance, benefit generosity, labor force withdrawal, claiming elasticity

JEL Classification: H55, J14, J22

Suggested Citation

Mullen, Kathleen J. and Staubli, Stefan, Disability Benefit Generosity and Labor Force Withdrawal. IZA Discussion Paper No. 9549. Available at SSRN: https://ssrn.com/abstract=2708362

Kathleen J. Mullen (Contact Author)

RAND Corporation ( email )

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Stefan Staubli

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

RAND Corporation - Labor and Population ( email )

United States

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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