Economic Incentives, Disability Insurance and Labor Supply
46 Pages Posted: 23 Apr 2018 Last revised: 21 Oct 2018
Date Written: October 17, 2018
Using a difference-in-difference model on full population data, I estimate the labor market responses following a 2015 Norwegian disability insurance (DI) reform. The reform introduced an incentive program to encourage DI beneficiaries to increase their labor supply, and I find that the program significantly increased the average working hours and modestly affected the labor market participation of DI beneficiaries. There is significant heterogeneity in the estimated effects; young DI beneficiaries increased both the intensive and the extensive labor market participation. The analysis accentuates the importance of analyzing the intensive labor market response when evaluating the effects of DI reforms.
Keywords: Disability insurance reform, labor supply, economic incentives, difference-in-difference, labor economics
JEL Classification: D60, H53, I38, J08, J22
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