Disability Benefit Generosity and Labor Force Withdrawal

Kathleen Mullen and Stefan Staubli

No 9549, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: A key component for estimating the optimal size and structure of disability insurance (DI) programs is the elasticity of DI claiming with respect to benefit generosity. Yet, in many countries, including the United States, all workers face identical benefit schedules, which are a function of one's labor market history, making it difficult to separate the effect of the benefit level from the effect of unobserved preferences for work on individuals' claiming decisions. To circumvent this problem, we exploit exogenous variation in DI benefits in Austria arising from several reforms to its DI and old age pension system in the 1990s and 2000s. We use comprehensive administrative social security records data on the universe of Austrian workers to compute benefit levels under six different regimes, allowing us to identify and precisely estimate the elasticity of DI claiming with respect to benefit generosity. We find that, over this time period, a one percent increase in potential DI benefits was associated with a 1.2 percent increase in DI claiming.

Keywords: disability insurance; benefit generosity; labor force withdrawal; claiming elasticity (search for similar items in EconPapers)
JEL-codes: H55 J14 J22 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2015-12
New Economics Papers: this item is included in nep-age, nep-ias, nep-lab and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - revised version published in: Journal of Public Economics, 2016, 143, 49-63

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Related works:
Journal Article: Disability benefit generosity and labor force withdrawal (2016)
Working Paper: Disability Benefit Generosity and Labor Force Withdrawal (2016)
Working Paper: Disability Benefit Generosity and Labor Force Withdrawal (2015)
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