Earnings responses to disability benefit cuts

Silvia Garcia Mandico, Pilar Garcia-Gomez, Anne Gielen and Owen O'Donnell
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Silvia Garcia Mandico: Erasmus University
Authors registered in the RePEc Author Service: Michael McAleer and Chia-Lin Chang ()

No 18-023/V, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Using Dutch administrative data, we assess the work and earnings capacity of disability insurance (DI) recipients by estimating employment and earnings responses to benefit cuts. Reassessment of DI entitlement under more stringent criteria removed 14.4 percent of recipients from the program and reduced benefits by 20 percent, on average. In response, employment increased by 6.7 points and earnings rose by 18 percent. Recipients were able to increase earnings by 0.64 euro for each 1.00 euro of DI income lost. Female and younger recipients, as well as those with more subjectively defined disabilities, were able to increase earnings most. The earnings response declined as claim duration lengthened, suggesting that earnings capacity deteriorates while on DI. The deterioration was steepest for male, younger and fully disabled recipients. Working while claiming partial disability benefits appears to slow the deterioration of earnings capacity.

Keywords: Disability Insurance; Health; Employment; Earnings (search for similar items in EconPapers)
JEL-codes: H53 H55 J14 J22 (search for similar items in EconPapers)
Date: 2018-03-14
New Economics Papers: this item is included in nep-ecm and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Earnings Responses to Disability Benefit Cuts (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20180023

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