Making Disability Work? The Effects of Financial Incentives on Partially Disabled Workers

61 Pages Posted: 18 Jan 2016

See all articles by Pierre Koning

Pierre Koning

CPB Netherlands Bureau of Economic Policy Analysis

Jan-Maarten van Sonsbeek

CPB Netherlands Bureau of Economic Policy Analysis

Abstract

This study provides insight in the responsiveness of disabled workers to financial incentives, using administrative individual data from the Netherlands from 2006 to 2013. We focus on workers receiving partial DI benefits and with substantial residual work capacities that can be exploited. After the first phase of benefit entitlement, workers that do not use their residual income capacity experience a large drop in benefit income. In effect, this implies a substantial increase in incentives to resume work. With entitlement periods in the first phase of DI benefits varying across individuals, we use a difference-in-difference approach to analyze the effects on the incidence of work, the wage earnings and full work resumption of disabled workers. Based on the effect estimate on work incidence, we infer a labor elasticity rate of 0.12. Elasticity estimates are highest among younger DI recipients, as well as individuals with mental impairments. The incentive change has only a limited impact on wage earnings of partially disabled workers and no significant impact on work resumption rates.

Keywords: disability insurance, work incentives

JEL Classification: C52, H53

Suggested Citation

Koning, Pierre and van Sonsbeek, Jan-Maarten, Making Disability Work? The Effects of Financial Incentives on Partially Disabled Workers. Available at SSRN: https://ssrn.com/abstract=2716425 or http://dx.doi.org/10.2139/ssrn.2716425

Pierre Koning (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands
+31 703383380 (Phone)
+31 703383350 (Fax)

Jan-Maarten Van Sonsbeek

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands
+31-6-27979438 (Phone)

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