Making Disability Work? The Effects of Financial Incentives on Partially Disabled Workers

Pierre Koning and Jan-Maarten Van Sonsbeek

No 9624, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This study provides insight in the responsiveness of disabled workers to financial incentives, using administrative individual data from the Netherlands from 2006 to 2013. We focus on workers receiving partial DI benefits and with substantial residual work capacities that can be exploited. After the first phase of benefit entitlement, workers that do not use their residual income capacity experience a large drop in benefit income. In effect, this implies a substantial increase in incentives to resume work. With entitlement periods in the first phase of DI benefits varying across individuals, we use a difference-in-difference approach to analyze the effects on the incidence of work, the wage earnings and full work resumption of disabled workers. Based on the effect estimate on work incidence, we infer a labor elasticity rate of 0.12. Elasticity estimates are highest among younger DI recipients, as well as individuals with mental impairments. The incentive change has only a limited impact on wage earnings of partially disabled workers and no significant impact on work resumption rates.

Keywords: disability insurance; work incentives (search for similar items in EconPapers)
JEL-codes: C52 H53 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2016-01
New Economics Papers: this item is included in nep-eur and nep-hea
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Citations: View citations in EconPapers (3)

Published - published in: Labour Economics, 2017, 47, 202-215

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Journal Article: Making disability work? The effects of financial incentives on partially disabled workers (2017)
Working Paper: Making Disability Work? The Effect of Financial Incentives on Partially Disabled Workers (2016)
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