Take-up and Labor Supply Responses to Disability Insurance Earnings Limits

Judit Krekó (), Daniel Prinz () and Andrea Weber
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Judit Krekó: Central European University

No 15377, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In most disability insurance programs beneficiaries lose some or all of their benefits if they earn above an earnings threshold. While intended to screen out applicants with high remaining working capacity, earnings limits can also distort the labor supply of beneficiaries. We develop a simple framework to evaluate this trade-off. We use a reduction in the earnings limit in Hungary to examine screening and labor supply responses. We find that the policy changed selection into the program modestly but reduced labor supply significantly. Viewed through the lens of our model, these findings suggest that the earnings threshold should be higher.

Keywords: earnings limit; policy reform; disability insurance; labor supply (search for similar items in EconPapers)
JEL-codes: H53 H55 I38 J22 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2022-06
New Economics Papers: this item is included in nep-hea and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Labour Economics, 2024, 89, 102583

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Related works:
Journal Article: Take-up and labor supply responses to disability insurance earnings limits (2024)
Working Paper: Take-Up and Labor Supply Responses to Disability Insurance Earnings Limits (2023)
Working Paper: Take-Up and Labor Supply Responses to Disability Insurance Earnings Limits (2023)
Working Paper: Take-Up and Labor Supply Responses to Disability Insurance Earnings Limits (2022)
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