Work

Do disability benefits hinder work resumption after recovery?

Year: 2022

Type: article

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.

Source: Journal of Health Economics

DOI: 10.1016/j.jhealeco.2022.102593

Authors: Pierre Koning, Paul Muller, Roger Prudon

Institutions: IZA - Institute of Labor Economics, Tinbergen Institute, Vrije Universiteit Amsterdam

Language: English

Topic: Retirement, Disability, and Employment

Subfield: Demography

Field: Social Sciences

Domain: Social Sciences

SDGs: Decent work and economic growth, Good health and well-being, Reduced inequalities

Open Access status: hybrid

Estimated APC paid: $3,380