Accurate assessment of earnings capacity is critical to the efficient operation of disability insurance (DI) programs. We use administrative data on the universe of Dutch DI recipients to estimate employment and earnings responses to reassessment of their earnings capacity under more stringent rules. We estimate that reassessment of recipients aged 30–44 removed 17 percent from the program and reduced benefit income by 20 percent, on average. In response, employment increased by 6.7 percentage points and earnings rose by 18 percent. Recipients were able to increase earnings by € 636 for every € 1000 reduction in DI benefit. This earnings response was strongest from those with more subjectively defined disabilities and a shorter claim duration, as well as younger and female recipients.

Additional Metadata
Keywords Disability insurance, Health, Employment, Earnings
JEL Government Expenditures and Welfare Programs (jel H53), Social Security and Public Pensions (jel H55), Economics of the Elderly; Economics of the Handicapped (jel J14), Time Allocation and Labor Supply (jel J22)
Persistent URL hdl.handle.net/1765/128261
Journal Labour Economics
Citation
Garcia-Mandico, S, Garcia-Gomez, P., Gielen, A.C, & O'Donnell, O. (2020). Earnings responses to disability insurance stringency. Labour Economics. Retrieved from http://hdl.handle.net/1765/128261