Earnings Responses to Disability Benefit Cuts

Tinbergen Institute Discussion Paper 2018-023/V

63 Pages Posted: 13 Apr 2018

See all articles by Silvia Garcia Mandico

Silvia Garcia Mandico

Erasmus University Rotterdam (EUR)

Pilar Garcia-Gomez

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Anne Gielen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Owen O'Donnell

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Multiple version iconThere are 2 versions of this paper

Date Written: March 12, 2018

Abstract

Using Dutch administrative data, we assess the work and earnings capacity of disability insurance (DI) recipients by estimating employment and earnings responses to benefit cuts. Reassessment of DI entitlement under more stringent criteria removed 14.4 percent of recipients from the program and reduced benefits by 20 percent, on average. In response, employment increased by 6.7 points and earnings rose by 18 percent. Recipients were able to increase earnings by 0.64 euro for each 1.00 euro of DI income lost. Female and younger recipients, as well as those with more subjectively defined disabilities, were able to increase earnings most. The earnings response declined as claim duration lengthened, suggesting that earnings capacity deteriorates while on DI. The deterioration was steepest for male, younger and fully disabled recipients. Working while claiming partial disability benefits appears to slow the deterioration of earnings capacity.

Keywords: Disability Insurance, Health, Employment, Earnings

JEL Classification: H53, H55, J14, J22

Suggested Citation

Garcia Mandico, Silvia and Garcia Gomez, Pilar and Gielen, Anne and O'Donnell, Owen, Earnings Responses to Disability Benefit Cuts (March 12, 2018). Tinbergen Institute Discussion Paper 2018-023/V. Available at SSRN: https://ssrn.com/abstract=3140345 or http://dx.doi.org/10.2139/ssrn.3140345

Silvia Garcia Mandico (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Pilar Garcia Gomez

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Anne Gielen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Owen O'Donnell

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
8
Abstract Views
88
PlumX