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Do disability benefits hinder work resumption after recovery?

Pierre Koning, Paul Muller () and Roger Prudon

Journal of Health Economics, 2022, vol. 82, issue C

Abstract: While a large share of Disability Insurance recipients in OECD countries are expected to recover, outflow rates from temporary disability schemes are typically negligible. We estimate the disincentive effects of disability benefits on the response to a (mental) health improvement using administrative data on all Dutch disability benefit applicants. We compare those below the DI eligibility threshold with those above and find that disincentives significantly reduce work resumption after health improves. Approximately half of the response to recovery is offset by benefits. Estimates from a structural labor supply model suggest that disincentives are substantially larger when the worker’s earnings capacity is fully restored.

Keywords: Disability insurance; Mental health; Labor supply; Health shocks (search for similar items in EconPapers)
JEL-codes: I1 J08 J22 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Working Paper: Do Disability Benefits Hinder Work Resumption after Recovery? (2020) Downloads
Working Paper: Do Disability Benefits Hinder Work Resumption After Recovery? (2020) Downloads
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DOI: 10.1016/j.jhealeco.2022.102593

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Journal of Health Economics is currently edited by J. P. Newhouse, A. J. Culyer, R. Frank, K. Claxton and T. McGuire

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